Anti-tobacco advocates and state officials across the country are proposing an increased tax on cigarette packs.
The Campaign for Tobacco-Free Kids published an annual report tracking the landmark 1998 Tobacco Master Settlement Agreement, a $206 billion settlement agreement between U.S. states and four major tobacco companies to settle lawsuits over smoking-related deaths.
The settlement is designed to fund anti-smoking initiatives in states across the country. However, the report found that many states are falling short of fully funding tobacco prevention programs. In fiscal year 2026, total state funding for programs allocated was 3.4% of the $21.7 billion set aside this year.
The campaign called on state legislatures to raise taxes on cigarette packs by $1.50 per pack. Advocates said this increase would generate $6 billion in new revenue to invest in programs that decrease tobacco use across the country.
The report comes as state legislatures across the country are considering tax increases on cigarette packs. In Utah, legislators are considering a bill that would raise the tax on cigarettes by $2 per pack. Michigan Gov. Gretchen Whitmer also called for a $2 tax increase in the state’s 2027 budget.
“We know states are facing budget shortfalls because of the cuts into federal public health programs, including Medicaid,” said Vince Willmore, vice president of communications at the Campaign for Tobacco-Free Kids. “So this is really a win-win solution for states.”
Willmore said states need to adopt significant increases to encourage smokers to quit and prevent kids from accessing tobacco products. The report claimed an increased tax could save $14.3 billion in long-term health care costs.
In fiscal year 2026, states will spend $728.6 million on tobacco prevention and cessation programs. This figure is $36.2 million less than last fiscal year and a quarter of the $3.3 billion recommended by the CDC.
Maine is the only state in the nation that spends the CDC’s recommended amount of funds on tobacco prevention and cessation programs.
Willmore told The Center Square that states have never done an adequate job of funding tobacco prevention and cessation programs. He said since most laws do not require the programs to be funded, they are not budgetary priorities.
“The states have treated the tobacco settlement as a cookie jar that they can use to fund a whole bunch of different programs instead of using the funds as intended to reduce tobacco use,” Willmore said.
States across the country have used tobacco settlement funds for wildly different purposes than intended. In 2001, New York used $19 million in settlement funds to build a sprinkler system in a golf course. A California county once used the settlement funds to build a juvenile jail in 2002.
Willmore said states have made it more difficult to track how tobacco settlement funds are used because they are placed in a general slush fund. He said states often used tobacco settlement funds to close budget gaps.
In 2003, North Carolina lawmakers used $25 million in the state’s settlement fund that year to address a hole in the budget. New York also used $24 million to pay off its debt on a county jail and office building in 2001.
Willmore called on regulators to implement strict standards against retailers who sell tobacco products. He also called for more enforcement measures on states that misuse tobacco settlement funds.
“States are at risk of losing their licenses and their ability to sell tobacco products,” Willmore said. “That creates a really strong incentive for states to comply with these laws.”
While Maine was the only state to fund tobacco-free health and education campaigns at CDC recommended levels, New Hampshire only provided $1 toward efforts for fiscal year 2026. New Hampshire was provided $211 million in settlement funds for fiscal year 2026
“They’re last in the nation in funding these programs,” Willmore said. “It’s probably costing the state, both in terms of lives and healthcare costs.”
The campaign estimated roughly 1,900 people die of smoking-related diseases every year in New Hampshire. Tobacco use is the leading cause of preventable death in the United States.
“There has been a lot of focus on fighting chronic disease,” Willmore said. “If we’re going to make progress against chronic disease, the fight against tobacco has to be a priority.”
