Federal Government Considering 775% Tax Increase on Tobacco
February 7, 2010 at 10:59 pm
by: Wire Report
| William F. Shughart II – Senior Fellow, The Independent Institute | |
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William F. Shughart II is a Senior Fellow at The Independent Institute and the Frederick A. P. Barnard Distinguished Professor of Economics at the University of Mississippi. A former economist at the Federal Trade Commission, Professor Shughart received his Ph.D. in economics from Texas A & M University, and he has taught at George Mason University, Clemson University, and the University of Arizona. Professor Shughart is Editor in Chief of Public Choice, past President of the Public Choice Society, President-elect of the Southern Economic Association, Associate Editor of the Southern Economic Journal, and Book Review Editor for Managerial and Decision Economics. His books include Taxing Choice: The Predatory Politics of Fiscal Discrimination; The Elgar Companion to Public Choice: The Organization of Industry; Antitrust Policy and Interest-Group Politics, Modern Managerial Economics (with W. Chappell and R. Cottle); Policy Challenges and Political Responses: Public Choice Perspectives on the Post-9/11 World (with R. Tollison); The Political Economy of the New Deal (with J. Couch); The Causes and Consequences of Antitrust (ed. with F. McChesney); and The Economics of Budget Deficits (with C. Rowley and R. Tollison). A contributor to numerous other books, Professor Shughart is the author of more than 100 articles for scholarly journals and his popular articles have also appeared in the Wall Street Journal, Los Angeles Times, Oklahoman, San Francisco Chronicle, Investor’s Business Daily, San Jose Mercury News, Philadelphia Inquirer, San Francisco Examiner, Kansas City Star, Pittsburgh Post-Gazette, Washington Times, Detroit Free Press, Clarion-Ledger, Vision Hispana, National Post, Providence Journal, and many other publications. |
Put a New Tax in Your Pipe and Smoke It.
(Wire/Ind.Inst.) – I am a college professor. My job description therefore requires that, among other things, I wear a tweed sport coat with leather elbow patches, grow a beard, spend two days a week in the classroom, and smoke a pipe.
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| H.R. 4439 Tobacco Tax Parity Act of 2010 (PDF 156KB) |
That last essential trait is now under attack. A bill before Congress proposes to increase the federal excise tax on pipe tobacco, making it equal to the recently enacted tax on loose cigarette tobacco purchased by smokers who “roll their own.” If passed, the bill would tax pipe tobacco at nearly $25 per pound, an increase of 775 percent over the current level.
Tobacco smoking is bad for one’s health. To my knowledge, however, no scientific studies have been conducted showing that pipe smokers (or cigar smokers, for that matter) have shorter lives than nonsmokers. There certainly is no evidence that nonsmokers who are exposed to environmental pipe or cigar smoke are harmed by it. Indeed, every person who smells the ambient odor of my pipe says that they are reminded of their fathers or grandfathers.
So, why are pipe smokers selectively being targeted by Washington? The answer is political opportunism. The federal government has been on a spending binge since George W. Bush occupied the White House. Over the past nine years, America’s taxpayers have been burdened with unprecedented expansions in the federal budget to finance new educational mandates (“No Child Left Behind”), new healthcare initiatives (Medicare Part D, to pay for granny’s meds), two wars on terrorism (Iraq and Afghanistan), failed economic “stimulus” plans and the bailouts of irresponsible financial institutions.
With annual budget deficits now running at $1.4 trillion, Washington is desperate for revenue enhancements (i.e., new sources of tax revenue). Rather than increasing taxes on a broad basis, which predictably would elicit broad-based opposition from already overburdened taxpayers, it is politically expedient to single out minorities who cannot bring effective power to bear in the legislative marketplace. And so we have seen proposals to tax those who have sacrificed wages in return for generous, “Cadillac” health-insurance plans, to tax the consumers of junk food and carbonated soft drinks, and to tax transactions in common stocks.
It is naïve to think that our elected representatives are attentive to the public’s interests. What presidents and the members of Congress do in practice is to transfer wealth to the special interests that are critical to their re-election prospects. It is therefore not surprising that they finance those wealth transfers by taxing groups that are not important to them electorally.
And so the tax burden falls most heavily on anyone, anywhere who is politically impotent, especially if they can be portrayed as the consumers of products that, on the flimsiest of scientific evidence, harm themselves or impose costs on others.
That mindset unleashes the nanny state to run amok. Pipe and cigar smokers are no threat to the public’s health. Even if smoking a pipe or a cigar harms the consumers of those products, that harm is borne privately and thus is not an issue of public policy concern.
But it unfortunately is if tax policy is predatory, with the aim at raising revenue from any group that cannot marshal effective political opposition to it. Perhaps it is time to add pipe tobacco, junk food and soft drinks to the agendas of the tea parties now being organized to oppose a government that is everywhere more intrusive.
Copyright 2010 The Independent Institute
February 7th, 2010 at 11:30 pm
God forbid government bite the bullet and cancel programs that cost way too much money or simply don’t work. That would be unpopular for all the people who make a living on government handouts! Sorry to say it, but I think we all know the government doesn’t give a hoot about how many letters you send in opposition. This bill will pass and it will wipe out most of the smaller pipe tobacco companies. With less competition, the ones who do manage to survive will be at liberty to charge nearly anything they want, thus the snowball grows. Another sad day for consumers and citizens in America…
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February 8th, 2010 at 4:26 pm
Let me start by saying that Dr. Shugart’s article is excellent and I am in full agreement with him. But unfortunately the groundwork for this tax was laid quite solidly when no one stood up for one of the poorest well-defined minority groups in America, those forced to roll their own cigarettes from shreds of tobacco and scraps of paper, when Congress and Obama hit them with over a 2,000% tax hike a year ago. Unfortunately pipe smokers are now in the position of Martin Niemoller’s last minority: they’re knocking on your door now, and there’s no one left. See Obama lie, blatantly to the entire country on national TV, about this and then think about what you can do. Hint: if you’re going to do anything at this point, it better be a lot. See: http://pro-choicesmokingdoctor.blogspot.com/2009/07/obama-in-bare-faced-lie.html Michael J. McFadden Author of “Dissecting Antismokers’ Brains”
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Allison Bricker Reply:
February 8th, 2010 at 5:10 pm
Mr. McFadden,
One could even go so far as to say the move to make smokers pariahs began in earnest during the 1990′s. Nevertheless as one who switched to rolling my own just prior to the huge tax increase last year, this “parity tax” really irks me to the core. My partner and myself switched to roll your own after doing the math and seeing how much we would save by going the RYO route as opposed to paying tribute any further to big tobacco companies such as Phillip Morris/Altria R.J.R and the likes.
Interesting to know they were key in lobbying in support on the RYO Tax as the anti-capitalist oligarchs of Big Tobacco needed governemnt to save their dwindling market share and were unable to compete with the upstart RYO companies.
Nevertheless, after the tax increase our local tobacconist advised that we switch away from “loose cut” to “pipe cut” as a way to circumvent the intolerable ridiculous tax. However it seems the slow leech that is government finally has decided to set it sights on the tribute which was slipping through its pull-peddling fingers.
Who is ready for a Tobacco Party Boston Style?
Don’t Tread on Me!
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February 12th, 2010 at 2:34 am
Allison, the key to bringing about anything resembling a Boston Tobacco Party lies in getting folks angry about how they’ve been lied to. Visit:
http://encyclopedia.smokersclub.com/257.html
and read the “New Stiletto” there. Feel free to print/distribute it as suggested. It’s one-sided but its facts are accurate and their presentation is honest… and it is most DEFINITELY styled to get people riled up when read in printed form.
- MJM
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