This month started with a historic tax increase on the price of cigarettes in the U.S. The rise is the largest ever single increase on the product, tripling the tax to more than $1 per pack. The tax on other tobacco products such as chewing tobacco has seen a similar increase. The increase will see American smokers averaging 20 a day pay $225 (£156) extra each year.
The Obama administration has said that the extra revenue will be used to pay for health care for children without insurance. They hope that an increase in price in a time of recession will also encourage more people to quit. Industry analysts have predicted a drop in sales of between 6 to 8%.
Quit-smoking help-lines have reported a massive increase in call volumes since the price hike was announced. Mary Kate Salley of Free and Clear, which runs quit-lines for 17 states, said that there was a 369% rise in calls compared with the same day in 2008.
In response, tobacco companies raised prices a few weeks ago in an effort to make up the money they expect to lose through diminishing sales. Phillip Morris upped prices by about 71 cents per pack last month, while RJ Reynolds Tobacco Co. put up list prices by between 41 to 44 cents and in many cases reduced discounts to retailers. A spokesman from RJ Reynolds said that “The federal tax increase was the primary driver.”