Obama budget would nearly double cigarette tax
Health care advocates hope a hike would prompt smokers to quit, while opponents say it would place too heavy a burden on the poor.
Among the $400 billion in tax increases tucked into the new budget is a proposal to increase the federal tax on cigarettes from $1.01 a pack to $1.95. The new cigarette tax would raise an estimated $78 billion over the next decade to pay for preschool programs for children.
Not surprisingly, health care advocates love the plan -- not only for the revenue but for the motivation it provides smokers to cut back or quit. Tax income aside, the Congressional Budget Office says the health improvement from decreased smoking would save the government about $1 billion over 10 years and generate additional revenue of $3 billion through increased earnings for healthier workers.
There's something to that. CNN points out that after a 62-cent-a-pack tax hike was passed in 2009, cigarette sales dropped by 10%, according to the Campaign for Tobacco-Free Kids. Meanwhile, a Centers for Disease Control study finds that despite anti-smoking measures and increased taxes on cigarettes, costs related to smoking amount to $193 billion a year in both direct medical payments and lost productivity. Smoking-related illness still accounts for 443,000 deaths a year in the U.S.
The plan's opponents are just as easily typecast as their health care counterparts: tobacco companies and anti-tax lobbyists. Cigarette maker Reynolds American (RAI) expressed strong opposition to the tax on the grounds that it disproportionately affects low- to middle-income Americans.
According to Reynolds, the median household income for a smoker in 2011 was $27,700, compared with $45,761 for nonsmokers. Nearly half of all smokers had a household income of less than $25,000 a year. Meanwhile, fewer than 15% of smokers had a household income of more than $75,000.
Reynolds did not, however, address a 2012 Gallup survey that found that 68% of American smokers consider themselves addicted to cigarettes. Meanwhile, 88% say if they could do it over again, they wouldn't start smoking, while 78% expressed a desire to quit.
Those numbers are exactly why anti-tax groups are against the new smoking tax. They question the wisdom of a tax that not only doesn't vary by income but applies only to a population that's 20% of all Americans and falling, according to Gallup. With the tax's stated purpose of stopping people from smoking, opponents wonder how long the government will be able to milk its dying cash cow.
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