Summary
Smoking is discretionary. A disproportionate amount of ill-health due to smoking-caused illness is experienced by some socioeconomic groups. But analysis of recent US data found that low-income smokers in the US are now less likely than middle or high-income smokers to quit following price increases, and that among remaining smokers, consumption is likely to fall equally among all income groups. Yet Administration needs a lot of income. Thus, on April Fools' Day, 2009 Congress imposed a 2173% ( yes: 2173%) tax increase on pound of tobacco to protect Big Tobacco, the tax cash cow they love to hate, but can’t live without. The government knows that if enough people ever stop smoking, or figure out how to get their nicotine fixes without going through Big Tobacco, tax receipts, and, hence, administration, takes a dive.
Analysis
Let’s start with the following statement of Dr. J.L. Corning ( in The NY Times, 1909 ), the eminent nerve specialist in New York: “ …There are some few men – a very few men – who should not smoke ( cigars ) at all.. But for the great majority – particularly nervous and irritable ones working in the city – I believe that tobacco is not only harmless, but beneficial…”
Here, we shall not go into similar effect of marihuana or “downers”, hard drugs, which may be even worse ( given the rise and affect of drug-related gangs on the contemporary society.)
What’s missing in the debate is a serious study, based on a very large database, covering at least several decades, if not a centuries, and several countries, showing obvious negative correlation between lung cancer and cardiac infarction in various ( age and professional ) segments of labour force?
It would be nice to have similar study showing negative correlation between middle- and high-income working segments and the need of “recreational” or other hard drugs that, as opposed to High Tobacco monopoly to be available in any corner store, gave rise to Drug Cartels, most recent Mafia and other highly unlawful businesses, tens of thousands of murders along the way and overworked and outgunned police.
The most recent debate about decriminalization of marihuana possession is only the tip of the iceberg.
It is argued that raising tobacco taxes is beneficial in revenue terms for government and revenue from increases can help to cover the cost of comprehensive smoking control programs including campaigns, services and treatments to assist smokers or the cost of other programs that benefit low-income groups.
Over the years, as state and federal tobacco taxes have risen over the years, more and more smokers have taken to rolling their own cigarettes and cigars. This, of course, requires purchasing the raw material. Until March 31, 2009 the tax on a pound of tobacco was $1.09. According to the mentioned retail source, you can get up to 600 cigarettes, or up to 30 packs, out of a pound (www.wisegeek.com/what-is-a-regressive-tax.htm,) As $1.09 is a lot less money for the Administration than the up to $11.70 (30 packs times $0.39) she was extracting from regular smokers before April 1, no doubt that many inside the halls of government, probably with the helpful assistance of cigarette makers were moaning about “unfair” competition, were characterizing the “roll-your-own” cigarette (RYOs) as “freeloaders.”
So Congress and president Obama fixed that “unfair” situation by raising the per-pound tax on tobacco purchases from $1.09 to $24.78, a 2173% tax increase.
This latest round of federal tobacco tax increases is supposed to fund the expansion of SCHIP, the State Children’s Health Insurance Program. There is no defensible reason, other than sheer vindictiveness, why a small minority of the population, the roughly one in five adults who smoke, should, as is supposedly - “supposedly” because many analysts, including Heritage, have concluded that the population of smokers would have to increase dramatically for the tax increases to fully fund SCHIP expansion; that clearly won’t happen, and will set the stage for raiding “general revenues,” as if there really are any available, in the future - the intent, pay for the entire multibillion-dollar cost that was added to the program earlier this year.
Last Wednesday, Gallup reported that the tobacco tax increases are “nearly three times as likely to affect low-income Americans as …. high-income Americans. That’s because 34% of the lowest-income Americans smoke, compared with only 13% of those earning $90,000 or more per year.” Since there is no reason to believe that “roll-your-own smokers” RYOs are any more or less prevalent among various income groups than smokers in general, the 2173% tax increase on raw tobacco purchases will hit affected lower-income RYO households even harder.
This then clearly states that the tobacco tax increases collectively represent about the most regressive tax imaginable.
