Iowa’s Tobacco and Vape Tax Expansion Would Disproportionately Impact Low-Income Adults

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Key Points:

• Legislative Overview: Senate Study Bill 3145 would significantly expand Iowa’s tobacco tax structure by raising cigarette and tobacco taxes while creating the state’s first excise tax on vapor products and consumable hemp.

• Core Expansion: The bill increases taxes across nearly all nicotine categories – combustible cigarettes, cigars, snuff, wholesale tobacco, vapor products, and hemp – broadening Iowa’s reliance on excise taxes to fund the Health Care Trust Fund.

• Cigarette Tax Hike: SSB 3145 raises the cigarette tax from $1.36 per pack to $2.01 per pack (a 48 percent increase), applies a floor tax on existing inventory, and increases the cigar tax cap from $0.50 to $0.55 per cigar.

• Wholesale Restructuring: The wholesale tobacco tax increases from 50 percent to 55 percent, and the snuff tax shifts from $1.19 per ounce to 55 percent of wholesale price – aligning it with other tobacco products.

• New Vapor Tax: The bill imposes Iowa’s first retail-level excise tax on vapor products – 15 percent of the retail sales price – applying to both in-store and delivery sales.

• Additional Tax Layer: Consumable hemp products would also face a new 15 percent retail excise tax.

• Revenue Allocation: All revenues would flow into the Health Care Trust Fund, with $1 million directed to the Double Up Food Bucks Program and $1 million to human trafficking victim services – leaving the majority to general health-care funding.

• Adult Smoking Trends: In 2024, 12.9 percent of Iowa adults (323,908 people) were current smokers – a 22.8 percent decline since 2016 and 16,709 fewer smokers year-over-year.

• Adult Vaping Growth: In 2024, 8.9 percent of Iowa adults (223,472 people) were current vapers – a 107 percent increase since 2016 and 32,030 additional adult users in just one year.

• Equity Concerns – Income: Smoking and vaping are heavily concentrated among low-income adults. In 2024, 23.8 percent of adults earning $25,000 or less smoked (2.8 times higher than higher-income adults), and 13.1 percent vaped (2.2 times higher than higher-income adults).

• Equity Concerns – Education: Among adults without a high school diploma, 21.5 percent smoked and 15.3 percent vaped – making lower-educated adults 3.6 times more likely to smoke and 4.4 times more likely to vape than college graduates.

• Revenue Instability: Iowa’s 2007 cigarette tax hike produced short-term gains but long-term decline. Revenues peaked at $229.5 million in 2008 and have fallen an average of 2.7 percent annually since. By 2023, collections were 34.3 percent below peak levels.

• Prevention Spending Gap: Despite collecting $248.5 million in tobacco revenue in 2024, Iowa allocated just $4.3 million to cessation programs – only two cents of every dollar collected.

• Harm Reduction Undermined: By taxing vapor products alongside combustible cigarettes, SSB 3145 risks discouraging substitution away from smoking, despite federal findings that certain e-cigarettes are “appropriate for the protection of public health.”

• Bottom Line: SSB 3145 expands Iowa’s reliance on declining, regressive tobacco revenues while taxing reduced-risk alternatives disproportionately used by low-income adults. Without shifting focus to cessation and harm reduction, the bill risks increasing financial burdens without accelerating public health gains.

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Iowa lawmakers are seeking to increase the Hawkeye State’s excise taxes on tobacco products and create a new tax on vapor products in an effort to generate additional revenue for the Health Care Trust Fund, while also appropriating funds to food assistance programs and human trafficking victim services.

Senate Study Bill 3145 would increase excise taxes on combustible cigarettes, cigars, snuff, and other wholesale tobacco products. The legislation would also impose a new retail-level excise tax on vapor products.

SSB 3145 would raise the state’s cigarette tax from 6.8 cents per cigarette to 10.05 cents, effectively increasing the per-pack tax (20 cigarettes) from $1.36 to $2.01. The increase would function as a floor tax, requiring retailers to pay the difference on existing inventory. The cap on cigar taxes would rise from $0.50 per cigar to $0.55 per cigar, while the wholesale tobacco tax would increase from 50 percent to 55 percent of the wholesale price. The legislation would also restructure the tax on snuff, shifting from a weight-based tax of $1.19 per ounce to 55 percent of the wholesale price to align it with other tobacco products. As with cigarettes, these products would be subject to inventory tax adjustments reflecting the rate increase.

SSB 3145 would also create Iowa’s first retail-level excise tax on vapor products, imposing a 15 percent tax on the retail sales price for both in-store and delivery sales. Additionally, the bill would establish a 15 percent excise tax on the retail sales price of consumable hemp products.

All revenues from tobacco, vapor, and hemp taxes would be deposited into Iowa’s Health Care Trust Fund. The legislation directs $1 million from the fund to the Double Up Food Bucks Program – an Iowa Healthiest State Initiative that supports SNAP recipients purchasing fresh fruits and vegetables. Another $1 million would be allocated to the Iowa Department of Justice for human trafficking victim services.

The proposed legislation is inherently regressive. Lower-income and lower-educated adults – many of whom are recipients of food security programs – smoke at disproportionately higher rates. Further, imposing excise taxes, often referred to as “sin taxes” intended to deter use, on tobacco harm reduction products ignores federal findings that certain e-cigarettes are “appropriate for the protection of public health.” Policymakers should also avoid overreliance on tobacco taxes as cigarette consumption continues to decline and associated revenues become increasingly unstable.

According to the CDC’s Behavioral Risk Factor Surveillance System, in 2024 an estimated 323,908 Iowa adults (12.9 percent) were currently smoking. This represents a 5.9 percent decrease from 2023 and 16,709 fewer adults smoking year-over-year. Since 2016, when 16.7 percent of adults smoked, Iowa’s smoking rate has declined by 22.8 percent.

As seen nationally, smoking is disproportionately concentrated among lower-income and lower-educated populations. In 2024, 23.8 percent of adults earning $25,000 or less were currently smoking, compared to 8.4 percent of those earning $50,000 or more – meaning low-income adults were 2.8 times more likely to smoke. Similarly, 21.5 percent of adults lacking a high school diploma were currently smoking, compared to just 5.9 percent of college graduates. Lower-educated adults were 3.6 times more likely to smoke.

Vaping rates have increased in Iowa in recent years. In 2024, an estimated 223,472 adults – 8.9 percent of the adult population – were currently vaping. This represents a 15.6 percent increase from 2023 and 32,030 additional adult e-cigarette users year-over-year. Since 2016, vaping prevalence has increased by 107 percent, rising from 4.3 percent to 8.9 percent – an additional 120,186 adults.

Similar to smoking, vaping is more prevalent among lower-income and lower-educated adults. In 2024, 13.1 percent of adults earning $25,000 or less were currently vaping, compared to 5.9 percent of adults earning $50,000 or more – meaning low-income adults were 2.2 times more likely to vape. Additionally, 15.3 percent of adults without a high school diploma were vaping, compared to only 3.5 percent of college graduates. Adults lacking a high school education were 4.4 times more likely to vape.

Excise taxes on tobacco products are also unreliable revenue sources as consumption declines. Iowa increased its cigarette tax in 2007 from $0.36 per pack to $1.36 per pack. In 2008, cigarette tax revenue surged to $229.5 million – an 88.4 percent increase over 2007’s $121.8 million. However, since 2009, cigarette tax revenues have declined on average by 2.7 percent annually. In 2023, Iowa collected $150.8 million in cigarette excise taxes – 23.8 percent higher than 2007 collections, but 34.3 percent lower than 2008 levels, representing $78.7 million less than peak collections.

Rather than imposing higher taxes on Iowa’s most vulnerable residents, lawmakers should prioritize directing existing tobacco revenues toward cessation programs and harm reduction strategies that help adults quit or switch to less harmful alternatives. In 2024, Iowa collected $248.5 million in tobacco tax revenues yet allocated only $4.3 million toward cessation funding. For every $1 collected in tobacco taxes, the state spent just $0.02 helping adults quit.

Ultimately, SSB 3145 expands Iowa’s reliance on increasingly unstable and regressive tobacco revenues while simultaneously taxing reduced-risk alternatives. Policymakers should pursue strategies that reduce smoking-related disease without disproportionately burdening low-income adults or discouraging harm reduction.

Nothing in this analysis is intended to influence the passage of legislation, and it does not necessarily represent the views of Tobacco Harm Reduction 101.