Rhode Island’s Budget Once Again Relies on Regressive Cigarette Taxes

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Key Points:

• Legislative Overview: House Bill 7127, Rhode Island’s FY 2027 Appropriations Bill, would increase the state cigarette excise tax from $4.50 to $5.25 per pack and impose a new floor tax on retail inventory.

• Tax Increase: The proposal raises the cigarette tax from 225 mills to 262.5 mills per cigarette – a 16.7 percent increase – while requiring retailers to pay additional taxes on unsold inventory and tax stamps held as of September 1, 2026.

• Adult Smoking Trends: In 2024, 89,854 Rhode Island adults (9.9 percent) were current smokers – a 4.2 percent increase from 2023, representing approximately 4,573 additional smokers.

• Income Disparities: 13.7 percent of adults earning $25,000 or less were current smokers, compared to 7.8 percent of adults earning $50,000 or more – making low-income adults 1.8 times more likely to smoke.

• Education Disparities: 14.5 percent of adults without a high school diploma smoked, compared to 3.9 percent of college graduates – less-educated adults were 3.7 times more likely to smoke.

• Persistent Inequities: Between 2004 and 2024, smoking declined across income groups, but disparities remain significant – low-income adults continue to smoke at disproportionately higher rates.

• History of Repeated Increases: Since 2002, Rhode Island has enacted eight cigarette tax hikes, most recently in 2024. Despite short-term revenue spikes, long-term collections have proven volatile and inconsistent.

• Revenue Volatility: Past increases temporarily boosted collections, but revenues later declined as consumption fell. External policy shifts – such as Massachusetts’ menthol ban – have also distorted cross-border purchasing patterns, demonstrating fiscal instability.

• Revenue vs. Prevention: In 2025, Rhode Island collected $157.9 million in tobacco tax revenue but allocated only $779,828 – less than 1 percent – to tobacco control programs. For every $1 collected, less than $0.01 was reinvested in cessation and prevention.

• Harm Reduction Context: Rhode Island continues to prohibit flavored e-cigarettes and imposes an 80 percent wholesale tax on nicotine pouches – products the FDA has determined are appropriate for the protection of public health.

• Equity Concerns: Increasing taxes on a shrinking population of smokers – many of whom are lower-income and less educated – further entrenches regressive fiscal policy.

• Policy Risk: Continued reliance on cigarette tax hikes may encourage cross-border purchasing and illicit market activity while doing little to accelerate long-term smoking decline.

• Bottom Line: HB 7127 doubles down on regressive and unstable cigarette taxation rather than advancing sustainable public health policy. If lawmakers aim to reduce smoking-related harm and stabilize revenues, they should prioritize reinvesting existing funds into cessation efforts and expanding access to reduced-risk alternatives – not imposing yet another tax increase on vulnerable residents.

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A budget proposal in the Ocean State follows a familiar pattern seen in other FY 2026 and FY 2027 proposals: relying on higher excise taxes on combustible cigarettes and imposing new floor taxes on existing tobacco inventory to generate revenue. Lawmakers should refrain from depending on cigarette tax increases. Such policies are inherently regressive, disproportionately impacting the state’s most vulnerable populations, and are fiscally unreliable as cigarette consumption – and therefore tax revenue – continues to decline over time.

House Bill 7127, the Governor’s FY 2027 Appropriations Bill, would increase Rhode Island’s excise tax from 225 mills per cigarette to 262.5 mills, effectively raising the tax on a pack of 20 cigarettes from $4.50 per pack to $5.25 per pack – a 16.7 percent increase. The legislation would also create a new floor tax on retail cigarette inventory, requiring retailers to pay additional taxes on cigarettes and tax stamps held in inventory as of September 1, 2026.

According to data from the Centers for Disease Control and Prevention’s Behavioral Risk Factor Surveillance System (BRFSS), in 2024 an estimated 89,854 Rhode Island adults aged 18 or older were current smokers – or 9.9 percent of the adult population. This represents a 4.2 percent increase from 2023, when 9.5 percent of adults smoked, amounting to approximately 4,573 additional smokers in the Ocean State.

Consistent with national trends, smoking in Rhode Island is disproportionately concentrated among lower-income and less-educated populations.

In 2024, 13.7 percent of Rhode Island adults earning $25,000 or less were current smokers, compared to 7.8 percent of those earning $50,000 or more. Low-income adults were 1.8 times more likely to smoke than their higher-income counterparts.

Educational disparities are even more pronounced. Among adults without a high school diploma or G.E.D., 14.5 percent were current smokers in 2024, compared to just 3.9 percent of college graduates. Adults lacking a high school degree were 3.7 times more likely to smoke than those with a college degree.

While smoking rates have declined over time across all income groups, the disparities persist. Between 2004 and 2024, smoking rates among low-income Rhode Island adults declined by 49.4 percent, while rates among high-income adults declined by 55.1 percent. Yet in 2004, low-income adults were 1.6 times more likely to smoke; two decades later, the disparity remains significant.

For more than twenty years, Rhode Island lawmakers have repeatedly increased the state’s cigarette excise tax. In 2002, the tax rose by $0.32 to $1.32 per pack. Since then, lawmakers have enacted seven additional increases, most recently in 2024, when the rate was raised by $0.25 to its current $4.50 per pack.

Despite these repeated tax hikes, revenue gains have proven temporary and inconsistent. For example, a $0.75 increase in 2004 raised the tax to $2.26 per pack and initially boosted collections by 17 percent – from $110.9 million in 2004 to $129.7 million in 2005. Yet by 2008, revenues had fallen back to $112.1 million. Similarly, cigarette tax collections jumped 13.9 percent between 2020 and 2021 – from $129 million to $146.9 million – largely due to Massachusetts’ menthol cigarette ban driving cross-border purchases, even as Rhode Island’s smoking rate declined from 13.5 percent in 2020 to 12.4 percent in 2021. These examples demonstrate how external policy shifts and consumption trends, rather than tax rates alone, drive revenue volatility.

Even more troubling is Rhode Island’s minimal reinvestment of tobacco tax revenue into tobacco control programs. In 2025, the state collected $157.9 million in tobacco tax revenue but allocated only $779,828 in state funding toward tobacco control programs – less than one percent of collections. For every $1 collected from individuals who use tobacco products, the state spent less than one cent on cessation, education, and prevention programs.

Rather than further increasing an already high cigarette tax, Rhode Island lawmakers should reconsider policies that may be undermining smoking cessation efforts.

The state continues to prohibit the sale of flavored e-cigarette products, despite evidence from numerous public health authorities that noncombustible nicotine products are significantly less harmful than cigarettes and can help adults transition away from smoking. Additionally, Rhode Island imposes an 80 percent wholesale tax on nicotine pouch products – products that the U.S. Food and Drug Administration has found appropriate for the protection of public health and is actively authorizing through its regulatory pathway.

Cigarette taxes are disproportionately regressive and inherently unreliable. Increasing the tax burden on a shrinking population of smokers – many of whom are low-income and less educated – is neither equitable nor sustainable fiscal policy.

If the goal is to improve public health and stabilize long-term revenues, policymakers should prioritize strategies that accelerate smoking decline, expand access to reduced-risk alternatives, and meaningfully reinvest existing tobacco revenues into evidence-based cessation programs. Continuing to rely on higher cigarette taxes while restricting safer alternatives risks perpetuating disparities, encouraging cross-border or illicit market activity, and undermining the very public health objectives lawmakers claim to support.

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.