Jun 03 2009
The Truth about Tobacco “Sin” Taxes. Who is really paying?
As I read the news I see that my home state of Wisconsin is looking to impose an additional $.75 tax on a pack of cigarettes. This after President Obama signed into law earlier this year legislation that took the Federal Excise Tax on cigarettes from $.40 to $1.01. That is over 150% of federal tax increases on smokers. This doesn’t include the state imposed tax increases that have and are coming.
Now, here in the state the average cost is between $6.26 and $8 for a pack of “smokes”. This raised a few questions in my mind regarding smoker demographics. Who are being affected by these increases, where is this money going, and what are the long-term effects of this reckless taxing?
Who are being affected?
Well needless to say, smokers are being hit immediately by these so called “Sin Taxes” but who are the smokers? It appears that smoking knows no gender since 25.7% of the population is male smokers and 21% of the population are female smokers (www.quitsmokinghub.com). Also smoking knows no race. Smokers are equally divided between Caucasian, African-American, Asian-American, and Hispanic. Native Americans are the leader of the group with 41% lighting up. Next in line are the African-American men, where 29% smoke (www.quitsmokinghum.com).
I’ve always been told that if you smoke you’re a joke. If you smoke you can’t be very intelligent. I’ve always disregarded that as typical lashing out until I saw that according to the American Heart Association, most smokers fall into the group of the least educated in the country. Statistics show that if you have a college degree there is only a 12% chance that you fire up a cig, while those with 9-11 years of education will light up 35% of the time.
These statistics are vital when gauging the impact that additional taxes have on an economy. We are told that 33% of smokers nationwide are below the poverty line. Here in my home state of
Wisconsin, www.smokefreewi.org reports that 60% of smokers have no more than a high school education, 50% of them earn less than $25,000 annually, and 77% don’t even break the $50,000 level of household income.
Simply put, cigarette taxes impose additional financial burdens on the least wealthy Americans. Statistics prove that the very people that Wisconsin Governor Jim Doyle, President Barack Obama, and many many members of Congress (Democrat and Republican alike) vowed to protect during election time was hit with one of the highest tax burdens in American history within the first 90 days of this year and much more is about to come.
Where is this money going?
With a pack of cigarettes ranging in cost of $6-$8, “Big Tobacco” must be raking in the profits, shouldn’t they? Actually, according to Altria Client Services, “Big Tobacco” earns a profit of $.90 per pack of cigs while the other $1.65 they take goes to manufacturing costs. That means that the other $3.45 - $5.45 is going to our friends within the federal and state government. Now tell me, who is making huge net profits on “Big Tobacco”? For every 1,000 packs of cigarettes sold, tobacco companies rake in $900 while the various government entities bring $3,450 - $5,450.
With tax increases rapidly being passed into law across this country, we should in no time be out of debt and back on to the path of economic well-being should we not? Not so fast. According to Senator David Tomassoni (D) of Minnesota and Governor Mark Sanford (R) of North Carolina, FET revenue from cigarette sales are being used on programs such as education, health care, and other necessary programs. Gov. Sanford states that $76.5 million of the FET is being used to enlarge and grow Medicaid. Many of you may feel that the filthy smokers should pay thier fair share. I use to agree with you.
The Long-term Effects.
As we see taxes on tobacco products increase, there is a minor “blip” in tax revenues as seen in California after tobacco tax increases first passed out there in 1999. It is proven, however, that this “blip” is only temporary at best. While monetary increases lurk around every corner and smoking bans (which I go into detail in a later article) take a stranglehold in multiple states, smoking has just become flat out annoying. It has become highly expensive and a nuisance.
Dr. Stanton Glantz, director for the Center for Tobacco Control Research and Education at the University of California, San Francisco has said that bans cause a 30% decrease in consumption. It stands to reason that if you have 30% less consumption, you have 30% less sales, and then you get 30% less tax revenue. Hello? It’s called mathematics, Government.
Thankfully we have some politicians that see this imminent threat steamrolling right for us but we don’t have enough. As long as politicians that can’t understand simple budgeting are running this country, whether a Democrat or Republican, we are doomed. If any of us took on a new expense that was certain to increase in the future (Medicaid growth is expected at 8%, $165.2 million will be needed to hold current ground within 10 years) with an stream of income that is expected to stay level or likely reduce we would be bankrupt and deemed “irresponsible”. We would get no bail-out money and there we would sit. Who are these politicians deciding our future? Did these individuals campaign as recklessly as they legislate?
Many argue that increased taxes will reduce smokers, which in theory is good but who will make up the financial shortfalls as smokers dwindle? We all know that politicians will never go without. As tax dollars reduce from a lack of people purchasing tobacco products, other “income streams” will be created. How long before we all feel the effects of these irresponsible decisions? As Sen. David Tomassoni says, “If we eliminate smoking, does it mean that those things [FET programs like Medicaid, education, ect.] go away?” I certainly think not. The government does not go without… who will pay? You and I my friend… You and I.
these damn bureaucrats are always meddling in situations and then not taking the time to understand the macroeconomic repercussions of their actions. would you ever sign a bill that had 1100 pages in it without knowing what it committed you to? simple one line insertions could change the country, but no one had the nerve to say it. it should be read and understood before being passed into LAW! does no one cares what signing a bill into law means any longer? before this is over we are going to need to take back our country before the obamanator destroys any chance of recovery. who knows, we may be sunk now. the chinese are keeping an eyeball on us to make sure that we don’t devalue their investments too much, nobody wants to buy our paper, and the pres is snuggling up with the third world dictators and socialist leaders of the world, leaving our true allies scratching their collective heads, and assuming that we have lost our minds. I submit that we have by making the election decision we did last year. democrats can’t say we didn’t warn them. enjoy your 200.5k in retirement. if you get to retire.
You know I find it very interesting that our governement can be so irresponsible with OUR money. I don’t smoke but tell you one thing. I hope that people don’t all quit at once. Your right that politicans don’t go without. Once taxed always taxed. Why should they want to eliminate spending. Very few of them actually pay taxes.