Will Federal tobacco tax increase hurt states from raising the tax on tobacco..

February 9, 2009 - The federal cigarette tax will increase by 62 cents to $1.01 per pack on April 1, 2009. Officials in at least 16 states are weighing proposals for significant cigarette-tax increases to fill gaping budget holes or fund programs.

The sharply increased federal tax (from 39 cents to $1.01 per pack) could alter their reasoning, because the higher cigarette prices are likely to decrease sales, eroding projected tax revenue.

Raising the cost of cigarettes makes non-smokers less likely to start, according to the U.S. government's Centers for Disease Control and Prevention. Raising cigarette excise taxes has proven to deter youth from becoming addicted to tobacco and has motivated thousands of Americans to quit.

The primary reason to increase the tax on tobacco is to get smokers to quit and dissuade kids from starting..

The effect a higher federal rate would have on state cigarette tax revenue: most states would face a decrease in revenue The demand for tobacco is strongly influenced by its price. Taxation is the most cost-effective way of reducing tobacco consumption, especially among young people and those on low income.

The National Association of Tobacco Outlets (NATO) estimates that the federal tax increase, which applies to several forms of tobacco, will lead to the loss of 117,000 of the industry's 1.2 million jobs, a devastating blow especially in a bad economy, said Executive Director Tom Briant. Tobacco Industry - Consequences of the SCHIP Federal Excise Tax Increases..

NATO is faxing letters to state legislators arguing that the federal tax diminishes prospects for raising state revenue through tobacco taxes.


Reference: Cigarette Tax Clouds Boosts Among States by Betsy Mackay, The Wall Street Journal, 2/8/2009.



February 22, 2009 at 2:13 AM

I live on $30,000 of income from social security and my pension, plus my savings. I wish to thank you President Obama and the 44 sponsors of H.R.2 for raising my federal taxes by $1,500 per year. Increasing a tax by 2185%, especially a tax that will fall almost entirely on the lower middle class and the poor, appears to be a direct contradiction of your campaign promises.

Who do you think rolls their own cigarettes? The guy making $200,000/year or the guy living on a fixed income that got addicted to cigarettes 35 years ago, when they were 35 cents a pack.

My life current expectancy is 77 years. The same as it would be if I did not smoked but drank 9 beers a week or had three accidents or violations in the last 3 years, or gained 90 pounds or had high blood pressure controlled by medication. If I had never smoked my life expectancy would be 82.

Four of my close relatives experienced the onset of dementia at 78. So not only will my smoking save me and my loved ones 5 years being a vegetable in a nursing home but it will save the taxpayer's $300,000 in nursing home costs plus 5 years of social security payments.

I think that will more than offset any additional costs that my smoking has caused the public. But if you really feel the need to punish people for their sins, lets be fair and tax the alcoholics, the reckless drivers, the obese and salt producers (high blood pressure) to the same degree.

A $4 tax on a bottle of beer.
A $1000 tax on Automobile Insurance
A $7 tax on a Big Mac
A $7 tax on a pound of table salt.