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calendar   Monday - March 30, 2009

Time To Quit

Single Largest Cigarette Tax Hike Ever Hits Wednesday




President Obama signed a law early in his administration to raise taxes from 39 cents to $1.01 per pack of cigarettes and from 19.5 cents to 50 cents per pound for chewing tobacco.




Tobacco companies and public health advocates, longtime foes in the nicotine battles, are trying to turn the situation to their advantage. The major cigarette makers raised prices a couple of weeks ago, partly to offset any drop in profits once the per-pack tax climbs from 39 cents to $1.01.

Medical groups see a tax increase right in the middle of a recession as a great incentive to help persuade smokers to quit.

Tobacco taxes are soaring to finance a major expansion of health insurance for children. President Obama signed that health initiative soon after taking office.

Other tobacco products, from cigars to pipes and smokeless, will see similarly large tax increases, too. For example, the tax on chewing tobacco will go up from 19.5 cents per pound to 50 cents. The total expected to be raised over the 4 1/2 year-long health insurance expansion is nearly $33 billion.

Smokers are mulling their options.

The tax increase is only the first move in a recharged anti-smoking campaign. Congress also is considering legislation to empower the Food and Drug Administration to regulate tobacco. That could lead to reformulated cigarettes. Obama, who has agonized over his own cigarette habit, said he would sign such a bill.

Prospects for reducing the harm from smoking are better than they have been in years, said Dr. Timothy Gardner, president of the American Heart Association. The tax increase “is a terrific public health move by the federal government,” he said. “Every time that the tax on tobacco goes up, the use of cigarettes goes down.”

About one in five adults in the United States smokes cigarettes. That’s a gradually dwindling share, though it isn’t shrinking fast enough for public health advocates.

Let’s not even consider the health issues. Let’s just look at the tax bite. At least two thirds of the price of a pack of smokes is taxes. So quit smoking just to impoverish the government. 

New Jersey, of course, has the highest state taxes in the nation on cigs. Right now it stands at $2.57 I think. And then they charge you the state 7% sales tax on top of that. In 2002 NJ tripled the tax on cigarettes. With the latest tax, on which they charge sales tax, they’ll make even more money from it.

On February 4, 2009, Congress enacted, and President Obama signed into law, a 62-cent increase in the federal cigarette tax, along with increases in other tobacco taxes, to fund expansion of the State Children’s Health Insurance Program (SCHIP). The federal cigarette tax will increase to $1.01 per pack on March 31, 2009.

Since January 1, 2002, 44 states and the District of Columbia have increased cigarette taxes, some more than once.  The average state cigarette tax has increased from 43.4 cents to $1.21 a pack.

image

A few weeks ago a brand-name pack of cigarettes cost around $6.75 in NJ. Then overnight the price shot up to nearly $8. That was the manufacturers raising their prices in anticipation of this latest tax hitting. And the vendors got their extra margin in. And of course the sales tax bite increased because of all of that:

Philip Morris USA, the largest tobacco company and maker of Marlboro, is forecasting a drop, but spokesman Bill Phelps said he cannot predict how big. Philip Morris raised Marlboro prices by 71 cents a pack early this month, and prices on smaller brands by 81 cents a pack. Other major companies followed suit.

The pricing moves raised eyebrows. “That’s nothing more than greed,” said Kevin Altman, an industry consultant who advises small tobacco companies. “They weren’t required to charge that until April 1. They are just putting that into their pockets.”

Responded Phelps: “We raised our prices in direct response to the federal excise tax increase, and people who are upset about that should find out how their member of Congress voted, and contact him or her.”

35 years ago, when I was in high school and the minimum wage was $2.35 an hour, a pack of smokes cost 50¢. I think a cartoon went for $4. Maybe less. With this latest tax hike, cigarettes will cost nearly 50¢ each.  Screw that. I think we should all give up the habit, just to hose the government. They make billions from the tobacco taxes, and yet have no appreciation at all of the people who give them this money. Nope, they’re all evil. Social pariahs. Unemployable health risks. And NOBODY takes their side. EVER.

It is unfortunate that anti-smoking groups are incapable of anything other than knee-jerk support for any and all cigarette taxes. They have never met a cigarette tax increase that they didn’t like, no matter who pays the tax, what the funds are used for, how regressive or unfair it is, how inappropriate the resulting fiscal dependence on smoking might be, and how sensible potential alternative funding sources, or alternative uses of the cigarette tax revenues might be.

The cigarette graphic is a little bit dated, but the slices are generally accurate. Without the insane taxes, cigarettes would cost about a quarter of what they do.


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Posted by Drew458   United States  on 03/30/2009 at 02:00 PM   
Filed Under: • MiscellaneousTaxes •  
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