A version of the following written comment was submitted to the Commonwealth of Massachusetts Joint Committee on Revenue on December 12, 2025.
Despite record lows in cigarette use, smoking is still the leading cause of preventable early death in the United States. Therefore, it makes sense that the Massachusetts legislature is considering interventions that would further reduce the prevalence of cigarette smoking. However, protecting public health is not as simple as restricting access to legal tobacco sales. In economies where illicit sales are legion, like the tobacco market, policymakers must be strategic to not further cede legal sales to illegal operators. Below, we provide brief analysis and commentary for bills H.3067, H.3074, and their Senate companions. We hope our description of the likely public health outcomes from the proposed legislation is helpful to your Commonwealth.
H.3067 — A bill to establish a $2 per ounce excise tax on oral nicotine pouches
On Jan. 16, 2025, the Food and Drug Administration (FDA) authorized the marketing of ZYN nicotine pouch products, making them the first nicotine pouch products ever authorized by the agency. According to Matthew Farrelly, director of the Office of Science in the FDA’s Center for Tobacco Products, “To receive marketing authorizations, the FDA must have sufficient evidence that the new products offer greater benefits to population health than risks. … In this case, the data show that these nicotine pouch products meet that bar by benefiting adults who use cigarettes and/or smokeless tobacco products and completely switch to these products.”
It is clear that the entire class of nicotine pouches is safer to consume than cigarettes and other combustible tobacco products. This is because nicotine pouches lack the products of combustion, including carbon monoxide and tar, which are disproportionately responsible for the harms caused by cigarettes. Therefore, Massachusetts must consider how increasing the tax on oral nicotine products reduces the incentive for people who smoke to switch.
With a tax of $2 per ounce, the price of a 15-pack of nicotine pouches, regardless of strength, would increase by about 42¢ per can. This increase might seem minor, but it is important to remember that the excise tax is included in the wholesale price used to calculate the sales tax, which would further increase the tax by approximately 2.5¢. With an average fiscal year price of $5.09 for a can of nicotine pouches in 2024, the new tax would have reduced the sale of pouches by about 2.3% that year. Massachusetts saw approximately $99.9 million in nicotine pouch sales in 2024, about 19,626,719 cans. With a 2.3% reduction in sales volume, we would expect 451,414 fewer cans sold, which would initially reduce sales tax receipts by $143,606, and then gross $1,676,426 of new income from the excise tax, netting $1,532,820 in new income if applied in 2024. With a growing market for nicotine pouches, this revenue projection is an underestimate for future years.
However, although the new excise tax will generate additional revenue, it will also significantly increase cigarette purchases. Nicotine pouches and cigarettes are substitutes, meaning that people who smoke cigarettes use them to reduce the number of cigarettes they consume. The Massachusetts legislature must understand that any increase in revenue from higher nicotine pouch taxes will also reduce public health due to more cigarette smoking.
H.3074 — A bill to increase the tax on a pack of cigarettes from $3.51 to $4.01 and increase the wholesale tax on cigars from 40% to 80%
It is universally accepted that increasing the tax on cigarettes reduces cigarette smoking on average, but such interventions can become counterproductive at extreme levels of taxation. Consider New York City, where only 16.6% of the cigarettes that were collected from public waste bins had the city’s tax stamps in 2024. This is because the total tax of $7.63 per pack motivated cross-border purchases and created an elaborate illicit market. In fact, these taxes are so high that they likely reduce the price of cigarettes for city residents, given the increased availability of lower-taxed substitutes supplied by the illicit market, purchased in neighboring localities.
Similarly, Massachusetts has the sixth-highest state cigarette tax in the entire country. In addition to its comprehensive ban on menthol cigarettes, such tax rates have motivated the proportion of cigarettes purchased in Massachusetts that are consumed in the state to fall from 37.9% in 2019 to 19.9% by 2023. Typically, research shows that increases in cigarette taxes lead to significant increases in tax revenue on average, but again, these relationships fall apart at the highest levels of taxation.
Although trading tax revenue for reductions in smoking may be a viable trade-off for policymakers, the drop in domestic purchases in Massachusetts may be completely replaced by cross-border or illicit market sales. According to research in Marketing Science, the ban on menthol cigarette sales following Massachusetts’ comprehensive tobacco flavor ban led to a $108 million reduction in tax revenue but resulted in no significant change in cigarette sales after considering the increase in sales in neighboring states’ counties. With such an elaborate illicit market already in operation and a relatively high cigarette tax compared to neighboring jurisdictions, Massachusetts is one of the few states in the country that likely would not see a change in cigarette smoking by increasing the tax on cigarettes.
On the issue of cigars, there is no public health gain from increasing the wholesale tax from 40% to 80%. Cigar smokers are rarely affected by their use of cigars, as cigar consumption is typically not habitual and, consequently, does not provide constant exposure to carcinogens. The tax increase may lead to additional revenue, but it also may not, due to cross-border sales. With such an elaborate illicit market already established in Massachusetts due to its ban on menthol cigarette sales, the legislature must carefully consider how increasing the price of cigars will further incentivize illegal purchases.