President Barack Obama claims his proposed 94-cent-a-pack cigarette tax will significantly reduce consumption, just like it did when he passed his 62-cent-a-pack tax in 2009. But that “significant reduction” is all smoke and mirrors, being used to distract you from the real reasons for this new tax increase: It gives Congress approximately $78 billion worth of breathing room in their budget and further enslaves middle- and low-income Americans who are already suffering under the weight of the new higher payroll taxes.
Obama’s 2014 budget includes $750 million in discretionary Preschool Development Grants to provide all low- and moderate-income four-year-old children with free, high-quality preschool, to be fully financed by a Federal $1.95-per-pack tax on cigarettes. In addition, according to Obama, this new tax increase will have substantial public health benefits because researchers have found that raising taxes on cigarettes significantly reduces consumption, especially for young Americans.
On April 1, 2009, Obama increased the Federal tax on a pack of cigarettes by 62 cents and according to his “researchers” there were tremendous benefits for everyone in the country. A report by Tobacco Free Kids, showed that every 10 percent increase in cigarette prices reduces youth smoking by about seven percent and total consumption by about four percent. Every state that has significantly increased cigarette taxes has enjoyed substantial increases in revenue, while still reducing consumption. And politicians win because polls show that voters overwhelmingly prefer raising cigarette taxes to other tax increases or cutting funding for crucial programs.
However, in 2012 the CDC issued a press release that painted a slightly different picture. Between 2000 and 2010, total consumption of all smoked tobacco products declined by 27.5 percent. But from 2010 to 2011 the decline was minimal, only 0.8 percent. And despite the overall decline, the consumption of non-cigarette smoked tobacco products actually increased by 123 percent.
From 2000 to 2011, the largest increases were in consumption of pipe tobacco (482 percent) and large cigars (233 percent), both items that are taxed at a significantly lower rate than cigarettes. From 2008 to 2011, sales of large cigars more than doubled, and in 2011 there was a sixfold increase in loose pipe tobacco sales – enough to make 17.5 billion cigarettes.
“While consumption patterns of traditional cigarettes have continued to decline, when we take into account these alternative cigarette-like products, we’re seeing a lack of change in the overall consumption of burned tobacco that is being inhaled,” said Terry Pechacek, associate director for science with the C.D.C. Office on Smoking and Health in Atlanta and one of the report’s authors.
These lower-priced tobacco products are particularly appealing to the youth market, the very market Obama says he’s helping to shield by increasing the cigarette tax. Because they’re not labeled as cigarettes, manufacturers are free to add fruit and other flavorings that are banned in cigarettes, and they’re substantially cheaper than cigarettes, which makes them especially attractive to young kids whose only income is the lunch money they get from their parents every week.
According to Reynolds American, a cigarette manufacturer opposing the new tax increase, the median household income for nearly half of all smokers in 2011 was $27,700 compared to $45,761 for nonsmokers, so Obama is planning to fund his free preschool initiative on the backs of the very people he’s proposing to help.
“The idea of increasing taxes on low- to middle-income Americans at this time is ludicrous,” Bryan Hatchell, a spokesman for Reynolds American, said in a statement. “The effect of the payroll tax increase this year, along with higher gas and food prices, have hit hard millions of Americans who are simply trying to keep their heads above water financially.”
And economists question whether it’s economically wise to fund a long-term project – early childhood education – with revenue that, if “research” is right, will decrease over time. Some suggest that Obama could raise much more long-term money if he’d focus on budget cuts instead of tax increases, but we all know that’s just a pipe dream.