The federal government is missing out on collecting about $1.5 billion in tobacco tax revenue due to inconsistent tax policies, the Government Accountability Office found in a new report.
“Pipe tobacco and some large cigars are taxed at lower rates than cigarettes, roll-your-own tobacco, and small cigars. As a result, the federal government is not collecting the revenue it would if taxes were the same for these smoking tobacco products,” the GAO found in its report titled “Tobacco Taxes: Federal Revenue Implications of Tax Rate Differences and Drawback Refunds.”
“For example, the government could raise at least an additional $1.5 billion over 5 years if tax rates for pipe tobacco and roll-your-own tobacco were equal,” the GAO reported.
The GAO noted that consumers are now using more e-cigarettes and oral nicotine pouches, which are not federally taxed.
The watchdog warned that tax revenue from traditional tobacco products could further decline heading into the future as e-cigarettes continue to gain in popularity.
Federal revenue from tobacco excise taxes has already gone down from about $14 billion in fiscal year 2014 to $9 billion in fiscal year 2024, the watchdog found.
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Author: Joe Weber
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