The Changing Tobacco User's Dollar

Overview

U.S. consumers spent $86.7 billion on tobacco products in 2003, about $1.5 billion less than in 2002. Expenditures are declining as lower consumption (mainly cigarettes) outweighs higher costs facing tobacco product users. For cigarettes, a larger part of the consumer's dollar went to taxes and manufacturers, while wholesalers, retailers, and farmers took less. Since 1998, wholesale cigarette prices jumped 122 percent and excise tax rates (Federal and state) have increased 74 percent. Cigarette manufacturers raised prices partially to cover expenses incurred as a result of the Master Settlement Agreement.