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1st April
2009
written by Sean Noble

In a cruel April Fool’s Day irony – that is NOT a joke — Obama has officially broken his pledge that no family making less than $250,000 would see a tax increase of any kind.  Today marks the implementation of a new tobacco tax, which raises the federal take from $0.39 per pack to $1.01 – nearly 300%!  The Wall Street Journal carries a great piece on this today.

Now, this is a tax that doesn’t affect most people.  But, it does affect poor people at a higher percentage than rich people.  It just so happens that more poor people smoke than rich people.  Professor Brad Schiller sums it up best  in his WSJ piece:

“I can make a firm pledge . . . no family making less than $250,000 a year will see any form of tax increase.” Remember that? It was Barack Obama, campaigning to become president last Sept. 12 in Dover, N.H.

Indeed, he promised repeatedly that 95% of American families would get a tax cut. So it’s especially fitting that he chose April Fools Day to implement his first tax increase — which will fall mostly on individuals and families who do not make anywhere near $250,000 per year.

Early in February, the president signed a law to triple the federal excise tax on cigarettes — which will jump from 39 cents per pack to $1.01 today. His administration projects this tax hike will bring in at least $38 billion over the next five years.

If you don’t smoke, maybe you don’t care. Maybe you even think a higher “sin tax” is a good thing. But health issues aren’t the only concern here. There are also questions of fairness, federalism, macroeconomic impact, and crime.

The fairness issue is particularly troubling. According to the Centers for Disease Control and Prevention, only one in five Americans smokes, so the excise targets a minority — and over half of all smokers are low income, and one of four are officially classified as poor.

Another irony in this is that the tax on cigarettes is going to be used to fund health care for poor kids, through a program called State Children’s Health Insurance Program (SCHIP).  The tax won’t add enough revenue to cover the SCHIP, in order to do that, 22 million Americans would have to take up the habit, which is demonstrated nicely below.  So the people hit the hardest by the tax are the parents of those who are supposed to get the benefit.  Maybe it’s not a tax at all, it’s just a user fee.

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4 Comments

  1. Chad
    01/04/2009

    Light me up. I care about kids.

  2. 01/04/2009

    Sean — I think you are so backwards on this post:

    Consider the “macroeconomic impact” =>>> Prices increase on cigarettes = decline in consumption. Lower consumption = lower health care costs. Lower health care costs = less money needed for medicare.

    Also consider:
    Smokers health care costs exceed non-smokers costs by substantial margins. Why should I pay higher premiums due to a smokers choice? (I know this statement sounds psudo-conservative, which further has me scratching my head over this post).

    Private insurance companies charges smokers a premium for their habit. Since we can both agree that corporations are more efficient then government, why would we discourage government to do the same?

    A great stat that we should inquire is what percentage of smokers are on medicaid/medicare or uninsured. If that number is larger then 25% would that change your opinion of cigarette premiums??

    Now — I also find it interesting the backlash in your post against a bi-partisan bill (SCHIP). I guess any bill that even has one Democrat voting for it — isn’t worth passing. This bill garnered support from both sides of the aisle and initially forced GWB to veto (think of how mad this bill makes the insurance companies — they should be the ones sucking up taxpayer money — not some government run program!!). Lets deny 22 million children health care (why should a child be entitled to anything, right? They should be working for these benefits!! We are encouraging a 10 year old to be lazy!!).

    Also — I love the WSJ. I read it daily. But opinion articles from the WSJ is opium for the right wingers — and carry very little value as a news source (this is even pointed out in the WSJ opinion overview page). That’s like me quoting Mareen Dowd and passing it off as news from The Times.

  3. Frankie
    02/04/2009

    amen, matthew. sean, i agree that you are waaaay off base on this. it is clear that the republicans are looking high and low for things to bitch about. your connection of this tax increase on cigarettes to breaking a campaign promise about income taxes is just ridiculous.

  4. 01/03/2010

    I also agree with the smoking bans, to an extent. The caveat is always “my rights end where yours begin” which is essentially saying that if I am bothered by someone smoking, they shouldn’t be smoking. This makes sense in places like restaurants (remember the smoking and nonsmoking sections that were only separated by a 4-foot tall barrier?) but not so much in the open air. Heck – sometimes when I’m driving I can smell someone smoking AHEAD of me on the highway driving @ 70 MPH! That said, I fully support people’s right to smoke. I don’t smoke, but my father did and it killed him. I support the right to smoke just as I support my right to eat a cheeseburger or go skydiving. Everyone that thinks it’s cool and fun to jump on the antismoking bandwagon, just wait until your wonderful government deems your activities as unhealthy and starts taxing/banning them.

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