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.

By Jason Notte Apr 11, 2013 2:02PM
Woman holding cigarette (copyright Michele Constantini/PhotoAlto/Getty Images)One of the biggest tax increases in President Barack Obama's new budget plan is one smokers are likely used to by now but no less offended by: a new tax on cigarettes.

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.


More on moneyNOW

905Comments
Apr 11, 2013 3:03PM
avatar
The amount of money that Americans pay in taxes is just ridiculous, considering how much of that money is being given to other countries and isn't even being spent on US citizens.
Apr 11, 2013 3:16PM
avatar
If everyone quits smoking what will they tax?

Our forefathers came to this country for a reason to escape the taxes of the British.  
  
Apr 11, 2013 2:28PM
avatar

The largest percentage of smokers are in the lower income brackets. So who is really having their taxes raised?

 Personally, I could care less, I don't smoke or use tobacco products. But he said he wouldn't raise taxes on the poor.

Apr 11, 2013 2:16PM
avatar
None of the lawsuit money went to help people quit. It went into general funds and adds. No relief for quitting products. Two faced government
Apr 11, 2013 2:39PM
avatar
What other product taxes are higher than the cost of the product itself?
Apr 11, 2013 2:34PM
avatar

Thanks for nothing Obutta

 

Hope and Change.......... He hopes you can't quit so he can get your change.

 

Apr 11, 2013 2:33PM
avatar
Please, remember the Prohibition and moonshining. When taxes are so high and not just the people will find a way around
Apr 11, 2013 2:45PM
avatar
Just as many or more deaths alcohol related. Where is that tax? Oh wait a minute they already tried that it was called prohibition
Apr 11, 2013 2:58PM
avatar

who the hell is this guy bullcrapping, when he first got in the whitehouse cig's doubled, my rolling tabacco doubled, from 4.50 a ppouch to 8.45, cig's in ct. is crazy enough, 7 to 9.50 a pack, then the state tax on top of that, my granddaughter got me to stop 2 years ago, but 8.50 every 4 days wasn't breaking the bank, but this tax **** will kill alot of people, trying to take money from the elderly once again, but can send our tax money to the ragheads over to the mideast, WTF, someone has to do something about this black runaway train on spending, him and his moooochelle

 

Apr 11, 2013 2:55PM
avatar
I guess smoking is now only for the rich.
Apr 11, 2013 3:01PM
avatar
start growing your own, dope and tobacco, screw them all,  someone told me his grandmother in newyork grew her own tobacco tax free, 100 plants lasted all year. guess we should just make our own booze to because this is where the boy is taking us. to broke city.
Apr 11, 2013 3:21PM
avatar
lets put a big tax on fast food, soda pop, candy WFT isnt that costing the insurance companies money.
Apr 11, 2013 3:02PM
avatar

I love it when the CBO comes up with pie in the sky numbers like "3 billion over 10 years through increased earnings for healthier workers."  all the while they have no idea how many will quit during this 10 year process of collecting 78 billion to pay for preschool.

 

And if everyone quits?  Obama will just pull 78 billion from somewhere else, because the first thing he will do is pull a presser with all the little toddlers crying because they can't go to preschool on the government dole...

Apr 11, 2013 3:13PM
avatar
its ok when no body smoking what will the do gooders who think there better then everybody else try to stop next? Its a ploy if you try to stop smoking the insurance companies wont cover to cost of the drug to stop. but at the same time bitch about how much it cost them when people get sick... what i bunch of BS
Apr 11, 2013 3:09PM
avatar
Obviously it was more traumatic than we thought for Obama to give up HIS cigarettes. But it wasn't our fault. Why take it out on us? Maybe he needs to remember how he got where he is today....one cigarette at a time! 
Apr 11, 2013 3:01PM
avatar
SOUNDS LIKE SOMETHING OBAMA BEN LADEN WOULD DO .
Apr 11, 2013 2:52PM
avatar
they should put a tax on lottery tickets too...Hey wait that is a tax
Apr 11, 2013 3:11PM
avatar
It sure seems like I was just reading that the government has actually lost tax revenue from the last tax they added to the cigarettes. The tax lose was attributed to the addicted switching to filtered cigars which are actually much worse for a smoker. Maybe it's a covert plan, to kill off a bunch of poor people, with an earlier death from tobacco related illnesses.
Apr 11, 2013 3:17PM
avatar
it's funny in a time when we are running a deficit this particular portion of the proposed budget not only increased taxes on cigarettes, but spends way more than it brings in with the new "program".  ie- tax them for a buck spend 2.50
Apr 11, 2013 4:03PM
avatar
Quit using smokers to balance the federal budget.  You want to save money, then get us the hell out of Afghanistan, and get rid of the stupid **** military bases in Western Europe.  Quit sending foreign aid to other countries and start re-building the structural mess here at home.  If tobacco is a legal product, then treat it as such.  I say this as a non-smoker.  If this is truly a free country, then quit punishing people who are exercising legal behaviours and go punish actual criminals.  I got a new tax for you.  How about a tax on parents who have illegitimate children?  Now that might help to really straighten this country out. 
Report
Please help us to maintain a healthy and vibrant community by reporting any illegal or inappropriate behavior. If you believe a message violates theCode of Conductplease use this form to notify the moderators. They will investigate your report and take appropriate action. If necessary, they report all illegal activity to the proper authorities.
Categories
100 character limit
Are you sure you want to delete this comment?

DATA PROVIDERS

Copyright © 2014 Microsoft. All rights reserved.

Fundamental company data and historical chart data provided by Morningstar Inc. Real-time index quotes and delayed quotes supplied by Morningstar Inc. Quotes delayed by up to 15 minutes, except where indicated otherwise. Fund summary, fund performance and dividend data provided by Morningstar Inc. Analyst recommendations provided by Zacks Investment Research. StockScouter data provided by Verus Analytics. IPO data provided by Hoover's Inc. Index membership data provided by Morningstar Inc.

Trending NOW

What’s this?

MARKET UPDATE

[BRIEFING.COM] The major averages posted solid gains ahead of tomorrow's policy directive from the Federal Open Market Committee. The S&P 500 rallied 0.8%, while the Russell 2000 (+0.3%) could not keep pace with the benchmark index.

Equity indices hovered near their flat lines during the first two hours of action, but surged in reaction to reports from the Wall Street Journal concerning tomorrow's FOMC statement. Specifically, Fed watcher Jon Hilsenrath indicated that the statement ... More

MSN MONEY'S