More Anti-Smoking Programs Less Smoke
Smoking is less socially acceptable now than it was in the past. Almost all workplaces now have some type of smoking rules. Some employers even prefer to hire non-smokers. Studies show smoking employees cost businesses more because they are out sick more.
However anti-tobacco researchers reported that only anti-smoking programs will make people quit smoking. That’s why the recent spreading of the State Children’s Health Insurance Program (S-CHIP) was funded by an increase in federal excise taxes on tobacco products. Congress raised the federal tax on cigarettes by 61 cents per pack and increased the tax on other smoking products, with the goal of equalizing the tax per pound of tobacco.
For example the resulting tax increase was much higher on some forms of tobacco:
• For large cigars, the federal tax increased 725 percent per cigar, from about a nickel to 40 cents.
• For loose tobacco, the tax increased 2,160 percent.
• For small cigars, it increased 2,653 percent.
Unfortunately, there is plenty of evidence that not only will these tax hikes harm poor consumers and small businesses, but they will fail to give the promised government revenues or public health benefits. This means that Congress will likely have to raise other taxes to cover the $33 billion estimated annual cost of the S-CHIP expansion.
Government tends to impose excise taxes on goods on which lower-income individuals spend a larger percentage of their use dollar. Expunges are usually taxed as a fixed amount per unit of volume or weight of a product, rather than on the product’s value. This means that less costly products are taxed as much as high-dollar-value products.
Excise taxes are regressive. As it is known individuals with less income carry a greater tax burden than people with higher incomes. This is especially true of tobacco taxes. For example in 2007, the poorest one-fifth of consumers spent 2.5 percent of their income on tobacco products, compared to 0.2 percent for the top 20 percent.
Millions of small retail businesses sell tobacco products. And there are many cigar manufacturers – unlike the cigarette industry, which is dominated by a handful of manufacturers and wholesalers. Unfortunately the tax increase has already affected domestic cigar producers and distributors.
Because of tobacco tax increase, tobacco smugglers started to buy cigars and cigarettes in low-tax controls and sell them in high-tax states, such as New York and California. Increases in taxes make the illegal tobacco trade even more profitable.
Researchers concluded that excise tobacco taxes are not a reliable source of revenue. Because they are a fixed amount per unit, they must be increased in order to keep up with inflation. On the other hand, sales, income and property tax revenues all rise with inflation and growth.
