Mississippi’s Hospital Funding Plan Relies on Regressive Tobacco Taxes

---

Key Points:

• Legislative Overview: Mississippi House Bill 145 would fund hospital uncompensated care by raising a wide range of taxes, including excise taxes on cigarettes, other tobacco products, heated tobacco, and vapor products.

• Policy Goal vs. Method: While improving hospital funding is a valid objective, the bill relies heavily on tobacco and vapor taxes that are regressive, unstable, and poorly suited for long-term health-care financing.

• Tax Expansion: HB 145 expands Mississippi’s definition of “tobacco” to include e-cigarettes and heated tobacco products, subjecting harm reduction products to the same tax framework as combustible cigarettes.

• Specific Increases: The proposal raises the cigarette tax from $0.68 to $0.88 per pack, increases the other tobacco products tax from 15 percent to 16 percent, and adds a per-stick tax on heated tobacco products.

• Regressive Impact: These taxes disproportionately burden low-income and less-educated adults, who are more likely to smoke, vape, and lack health insurance – effectively making vulnerable populations fund uncompensated care through higher excise taxes.

• Smoking Disparities: In 2024, nearly 24 percent of Mississippi adults earning $25,000 or less smoked, compared to 8.8 percent of higher-income adults, with smoking declines far slower among low-income residents.

• Education Gap: Adults without a high school diploma were over four times more likely to smoke than college graduates, and smoking rates in this group actually increased year over year.

• Vaping Patterns: About 8.2 percent of Mississippi adults vape, with higher use among less-educated adults – yet these products are substantially less harmful than cigarettes and play a role in smoking reduction.

• Harm Reduction Trend: Since 2016, Mississippi has seen vaping rise 74.5 percent while smoking fell 39.2 percent, with young adult smoking dropping more than 76 percent, signaling successful substitution away from combustion.

• Funding Mismatch: Despite collecting $252.4 million in tobacco revenue in 2024, Mississippi spent only $8.7 million (3 cents per dollar) on tobacco control, cessation, and prevention.

• Bottom Line: HB 145 risks undermining harm reduction and worsening inequities; redirecting existing tobacco revenues toward cessation and harm reduction would reduce smoking, lower health-care costs, and support hospitals without imposing new regressive taxes.

---

Legislation introduced in the Magnolia State seeks to raise revenue for hospital uncompensated care by increasing a range of state taxes, from firearms and recreational vehicles to alcohol, cigarettes, and vapor products. While strengthening health-care funding is a laudable goal, states should refrain from relying on so-called “sin taxes,” particularly tobacco and vapor product taxes, which are unreliable over the long term and inherently regressive. Moreover, the use of tobacco harm reduction products – including e-cigarettes – has the potential to reduce health-care costs as adults transition away from combustible cigarettes to substantially safer alternatives.

If enacted, Mississippi House Bill 145 would create the Mississippi Hospitals Uncompensated Care Assistance Fund, a new special fund in the State Treasury designed to help hospitals recover costs associated with uncompensated medical care, including services provided to patients who cannot pay or who lack insurance coverage, Medicaid, or other reimbursement sources. The fund would be administered by the Mississippi Department of Health, though expenditures would require legislative appropriation.

HB 145 would raise revenue for the fund through multiple tax increases, including higher sales taxes on ammunition, archery equipment, ATVs, firearms, jet skis, and motorcycles, as well as an increase in the tax on alcoholic beverages.

Notably, the bill would also raise taxes on combustible cigarettes and other tobacco products while expanding the statutory definition of “tobacco” to include tobacco harm reduction products. Under HB 145, both heated tobacco products and vapor products – regardless of nicotine content – would be classified as tobacco and subject to Mississippi’s tobacco tax framework.

Specifically, the legislation would increase the cigarette tax from $0.034 per cigarette to $0.044 per cigarette, raising the tax on a pack of cigarettes from $0.68 to $0.88. The tax on other tobacco products would increase from 15 percent to 16 percent of the manufacturer’s list price and would apply to cigars, chewing tobacco, smoking tobacco, snuff, and newly included vapor products. Heated tobacco products would be subject to a new excise tax of $0.0125 per stick.

These proposed tax increases are highly regressive, as they rely primarily on consumer excise taxes that disproportionately affect lower-income and lower-educated adults – groups that are also more likely to be uninsured. In effect, HB 145 creates a circular financing model in which vulnerable populations indirectly fund hospital uncompensated care through higher taxes on products they are more likely to use.

In 2024, according to the Centers for Disease Control and Prevention’s Behavioral Risk Factor Surveillance System, an estimated 313,802 Mississippi adults – 13.8 percent of the adult population – were current smokers. Although this represents one of the lowest smoking rates on record, smoking remains heavily concentrated among lower-income and lower-educated adults.

Among adults earning $25,000 or less annually, 23.8 percent were smokers in 2024, compared to 8.8 percent of adults earning $50,000 or more. Between 2023 and 2024, smoking declined by just 1.4 percent among low-income adults, compared to a 14.6 percent decline among higher-income earners. Over the longer term, smoking rates among adults earning $25,000 or less declined by an average of only 0.8 percent annually between 2004 and 2024, compared to a 1.9 percent annual decline among those earning $50,000 or more.

Educational disparities are even more pronounced. In 2024, 28 percent of Mississippi adults without a high school diploma or G.E.D. were smokers, compared to just 6.8 percent of college graduates. Adults without a high school education were more than four times as likely to smoke as those with a college degree. Notably, smoking rates among adults without a high school diploma increased by 1.4 percent between 2023 and 2024, while smoking among college graduates declined by 4.2 percent.

In 2024, an estimated 186,011 Mississippi adults – 8.2 percent of the adult population – were current e-cigarette users. While vaping rates are similar across income groups, educational disparities persist. Among adults without a high school education, 10.5 percent were vaping, compared to 5.2 percent of college graduates, making those without a diploma twice as likely to use e-cigarettes.

E-cigarettes are a tobacco harm reduction tool and should not be subjected to punitive excise taxes intended to deter use. As products that are substantially less harmful than combustible cigarettes, public policy should encourage – not discourage – their adoption among adults who are unable or unwilling to quit smoking entirely.

In Mississippi, the introduction of e-cigarettes has coincided with substantial declines in smoking, particularly among young adults. In 2016, 22.7 percent of Mississippi adults smoked while 4.7 percent vaped. By 2024, vaping had increased by 74.5 percent, while smoking declined by 39.2 percent. Among adults aged 18 to 24, smoking fell by 76.2 percent between 2016 and 2024, while vaping increased by 90.2 percent. In 2024, just 6.1 percent of young adults were smokers – one of the lowest rates on record and only slightly above the World Health Organization’s benchmark for a smoke-free society.

Rather than increasing regressive taxes on products disproportionately used by Mississippi’s most vulnerable residents, lawmakers should prioritize smarter, more sustainable health-care funding strategies. Mississippi already generates substantial tobacco revenue – $252.4 million in 2024 – yet allocated only $8.7 million to tobacco control programs. For every dollar collected in tobacco revenue, just three cents were invested in helping adults quit. Redirecting existing funds toward evidence-based cessation and harm reduction programs would reduce smoking, lower health-care costs, and ease the uncompensated care burden – without placing an even heavier tax burden on those least able to afford it.

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.