Why Tobacco Products Are So Expensive

Why Tobacco Products Are So Expensive

Users of tobacco products have seen huge increases in the prices they pay for their favorite products in recent years. Yet, the cost of growing and processing tobacco has not changed in proportion with these price increases. In fact, the cost of producing these products has hardly changed at all.

The reason tobacco products have become so expensive is that the federal government and all state governments have attached taxes to the products. In the last few years, initiatives have been put in place to raise these taxes to a level that forces users of tobacco to quit because they cannot afford to purchase the products.

Manufacturers have worked against these measures by creating different price tiers for their products. Brand names that have been around the longest still cost the most. Generics were introduced in the 1980s when there was a push to offer reduced prices on all types of products by removing brand names and simply packaging in black and white. Later, an additional tier was added that would be called sub-generic.

Today, there are several brands that continue to be priced at the generic and sub-generic levels. The taxes assessed on these products are the same regardless of price tier. This means that the producers are paid less per item on the lower priced brands while the government still gets its money.

Another factor that has driven prices upward is the fact that the FDA was recently granted the power to regulate tobacco products. This power was granted due to the addictive nature of nicotine, the drug found in tobacco. The FDA already regulated distribution of nicotine containing products that were intended to help people stop smoking, even though many are now available over the counter that once required a prescription to purchase.

Some tobacco users have found a way to lower the cost of smoking by purchasing cheap cigarettes over the internet. This practice does not eliminate completely the federal taxes on tobacco products. It does, however, eliminate the state taxes paid on each pack. Most tobacco products offered for sale via the internet originate outside the US or on the Indian reservations found in the western US. The reason these are not taxed at the same rates is that Native Americans living on reservations are considered to be outside the US and are exempt from the vast majority of taxes paid by citizens not found on reservations. Products that ship across state lines are immune from state and local taxes of all types.