It is widely recognised that tobacco taxes are a potent device to decrease tobacco consumption. In the United States, however, tobacco taxes have fallen, after adjustment for inflation, since the first Surgeon General’s report was issued in 1964 in which the US government acknowledged the link between tobacco and disease. The proportion of pack price accounted for by tax has decreased by nearly half since 1964. Indeed, there have been only two increases in the federal tobacco tax since 1950.

These facts produce a startling enigma. Despite major progress on other issues of tobacco control, the United States has the lowest taxes on tobacco of any major industrial country, although it is the richest such country.

This report provides background on issues of tobacco pricing and taxation, and considers research needs to further understand the potential for increases in excise tax to limit cigarette consumption. It also delineates the research needed to advance the acceptance of increased excise taxes as a key policy for tobacco control. Although this report deals specifically with pricing and taxation in the United States, similar, if not identical, questions arise for most nations.