Effects of the Recent Increase in State Excise Tax Rates in Arkansas


On February 12, 2009, the Arkansas General Assembly passed legislation to increase the state's excise tax rates on all tobacco products. As required by the bill, on March 1 the cigarette tax went from 59 cents to $1.15 per twenty-pack. This increase moved Arkansas' cigarette tax to rank 25 among State cigarette taxes. Taxes on other tobacco products rose from 32% of the wholesale price to 68%. Arkansas will use the new revenue primarily to expand the ARKids First health insurance program for low-income children by lowering the income threshold for eligibility.

This project will examine the financial and health effects of the above-named changes in Arkansas' tax policy and public health funding. Because tobacco is used disproportionately by lower-income individuals, some believe that tobacco tax increases are inherently regressive. However, tax increases decrease tobacco use, with a larger effect on lower-income individuals. Further, in Arkansas, the new revenue will be returned to lower-income families via ARKids First. Therefore, there may be an overall financial and health benefit to Arkansas' poorer families. The objective of this project is to review available evidence to determine the overall effects on socioeconomic disparities in tobacco consumption and receipt of basic health services.

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An earlier phase of this research was done from October 2009 to June 2010 with a $27,000 grant from the sponsor.