A new report from the U.S. Government Accountability Office reveals a persistent imbalance in federal tobacco taxes that continues to drain significant revenue.
Despite the intention behind Children’s Health Insurance Program Reauthorization Act (CHIPRA) in 2009 to standardize excise rates across tobacco products, pipe tobacco and large cigars remain taxed at far lower levels than cigarettes and roll‑your‑own tobacco.
The discrepancy encouraged both consumers and manufacturers to shift toward these cheaper alternatives, according to the report. As a result, federal excise tax collections plummeted—from $14 billion in fiscal year 2014 to just $9 billion in fiscal year 2024.
The GAO’s analysis shows that if the tax rate for pipe tobacco were raised to match that for roll‑your‑own, the federal government could add at least $1.5 billion to its coffers over five years (FY 2025–2029).
In the words of the report, “With consumers choosing more e‑cigarettes and oral nicotine pouches—neither of which is federally taxed—this revenue could decline further.”
The report also highlights drawback claims—refunds of up to 99% of duties, taxes, or fees paid on imported tobacco products that are subsequently exported or destroyed. The claims, processed through Customs and Border Protection, have resulted in hundreds of millions in refunds: $312million in FY 2019–2024, increasing to approximately $392 million in FY2024 alone.
As of July 2025, Congress has not taken action to eliminate these tax disparities.
