By Timothy S. Donahue

Top Takeaways:

• Revenue slide: Wisconsin cigarette tax revenue fell to its lowest inflation-adjusted level since 1992.
• Consumer shift: Growth in vaping and nicotine pouches is reshaping the state’s nicotine tax base.
• Policy pressure: Public health groups are urging lawmakers to raise taxes on alternative nicotine products.

Wisconsin’s cigarette tax revenue keeps shrinking—and vaping is a major reason.

A new report from the Wisconsin Policy Forum (WPC) found that cigarette tax collections fell to just under $370 million for the fiscal year ending June 2025, the lowest inflation-adjusted total since 1992 and more than 60% below the state’s 2010 peak.

“There’s just a big shift taking place in how consumers buy and use these products,” said Mark Sommerhauser, communications director for the WPC. “That’s reflected in a lot of the changes in the tax revenues that the state is collecting.”

Like much of the U.S., Wisconsin has seen cigarette smoking steadily decline, while use of e-cigarettes, nicotine pouches, and other smoke-free products has increased rapidly. The report found that Wisconsin currently has the 18th-highest cigarette tax in the country but ranks near the bottom for taxes on vaping products. Wisconsin also does not tax vaping fluid sold separately from devices, resulting in a lower overall tax burden for many vape products.

Since Wisconsin began collecting taxes on vaping products in 2020, revenue from those taxes has increased by more than 500% over the past five years. But Sommerhauser said that growth is still not enough to offset declining cigarette sales.

“It’s just that the rate is so low that that’s not going to produce nearly enough revenue to offset what the state is losing from having fewer cigarette smokers,” he said.

The report highlights a growing issue for states heavily reliant on cigarette taxes as consumers shift toward lower-taxed nicotine alternatives. At its peak in 2010, nearly $6 of every $100 flowing into Wisconsin’s general fund came from nicotine-related taxes. By 2024, that share had fallen to just over $2 per $100, according to the report.

The trend could increasingly shape future debates over vaping taxes, nicotine pouch taxes, and even cannabis legalization as lawmakers seek replacement revenue sources. For the nicotine industry, the findings also reflect the accelerating shift away from combustible cigarettes and toward alternative nicotine products.

That transition has become especially evident in the nicotine pouch market, where brands such as ALP, FRE, ZYN, VELO and on! continue to expand nationally.

Public health advocates, however, argue that lower nicotine consumption could eventually save states more money than they lose in tax revenue.

Molly Collins, advocacy director for the American Lung Association in Wisconsin, said that tobacco and nicotine use continue to drive major healthcare costs. “The more we can get folks to never start or to quit smoking, the more money our state will save in the long term,” Collins said.

Collins also argued that the relatively low cost of vapes and nicotine pouches contributes to youth uptake and called for taxes on alternative nicotine products to more closely match cigarette taxes.

“The tobacco industry has stayed one step ahead of us, and they are creating new products to expand their market and increase their profits,” Collins said. “I think we could be doing more in our state to at least catch up to them and say, ‘Listen, we need to tax these products at an equal rate to cigarette products.’”

The report stops short of recommending specific tax hikes. But it makes clear that as consumer nicotine habits change, the economics of tobacco taxation are evolving with them.