Georgia reviews tobacco tax increase amid rising Medicaid costs linked to smoking

The Cost & Effects of Smoking Study Committee convened on June 12, 2025, to discuss the financial implications of smoking in Georgia, focusing on updated estimates for fiscal years 2026 and 2027. The meeting highlighted the significant economic burden of smoking, particularly in relation to Medicaid costs and potential tax revenue from tobacco products.

The committee began by reviewing the current state of cigarette taxation in Georgia, noting that the tax stands at 37 cents per pack, ranking the state 49th out of 50 in the nation. Historical context was provided, indicating that the tax was originally proposed at 58 cents by Governor Purdue but was reduced by the General Assembly. If adjusted for inflation, the tax would currently be approximately 69 cents. Comparatively, neighboring states have higher taxes, with Florida at 34 cents and Texas at 41 cents per pack.

The discussion revealed that Georgia sells approximately 311 million packs of cigarettes annually, generating an estimated $115 million in tax revenue, which is significantly lower than the $2.7 billion attributed to smoking-related Medicaid costs. This discrepancy highlights a substantial gap, as the state only recoups about 15% of smoking-related healthcare expenses through cigarette taxes.

The committee emphasized the broader economic impacts of smoking, noting that smoking reduces per capita income by over $1,000 annually and contributes to a total economic loss of approximately $11 billion in Georgia. Nationally, smoking accounts for over 4% of GDP, with a cumulative economic impact of around $900 billion.

The committee also discussed the trend of smokers transitioning to vaping, which has contributed to a decline in cigarette sales of about 4% per year. This shift raises questions about future tax structures and the need for comprehensive taxation policies that encompass all tobacco products, including vaping.

In terms of policy recommendations, the committee suggested setting a target to reduce smoking rates by 5 percentage points, aligning with federal health goals. They also proposed indexing the tobacco tax to inflation to prevent future losses in revenue and public health benefits.

The meeting concluded with a call for further exploration of comprehensive taxation strategies that could include all forms of tobacco and vaping products, ensuring a cohesive approach to addressing the health and economic challenges posed by smoking in Georgia.