Significance: Cigarette taxes reduce demand for cigarettes. Inflation undermines the effects of taxes when tax increases do not keep pace with rising incomes. Cigarette tax policy must consider price in relation to smokers' incomes. This study uses small area estimation methods to estimate state-level cigarette affordability from 2003-2015.

Methods: Data came from Waves 2-9 of the International Tobacco Control (ITC) US Survey, a nationally representative cohort survey of smokers aged 18+. Cigarette affordability was defined as the proportion of a smoker's income spent on 100 packs of 20 cigarettes using self-reported prices and annual per capita household incomes. At each wave, individual affordability was estimated using linear mixed effects models in R (Version 3.3.3). Fixed effects were sex, age group (18-24, 25-39, 40-54, 55+), race (white, black, Hispanic, other), education (≤ high school vs. more) & employment status (employed vs. not). State was entered as a random intercept. Model parameters were combined with auxiliary information to estimate state-level affordability. Auxiliary information (state-level proportion of smokers at each category of fixed effect covariates), was estimated from the Behavioral Risk Factor Surveillance System survey contemporaneous to the ITC wave.

Results: Affordability varied across states in most years. Before 2008, smokers spent less than 3% of their income on cigarettes. Cigarettes became less affordable in 2008. By 2010, smokers spent 3.7% of their income on cigarettes. Cigarettes were least affordable in southern states from 2010-2013. Cigarettes became more affordable as economic conditions improved by 2015 but did not return to levels observed prior to the 2009 federal cigarette tax increase. Affordability varied most in southern states in 2015, ranging from 3% in Virginia to 5.2% in the District of Columbia.

Conclusions: Reductions in cigarette affordability are likely due to the 2008 economic recession and the 2009 federal tax increase. Results demonstrate that if prices remain unchanged following improved economic conditions, cigarettes remain affordable. Tax increases must keep pace with improved economic conditions.