Federal Cigarette Tax Going Up

Barack Obama Smoking President Obama approves law to raise the federal cigarette tax by 62 cents.

by Sean Mussenden-Media general News Service

Published: Thu, February 05, 2009 - 7:25 am CST Last Updated: Thu, February 05, 2009 - 7:29 am CST

WASHINGTON -- President Barack Obama signed legislation Wednesday to more than double the federal cigarette to pay for an expansion of health insurance for poor children.

Tobacco companies hurt by declining smoking rates expect the 62-cent increase -- to $1.01 per pack -- to further cut cigarette sales after it takes effect April 1.

The major tax increase on cigarettes, smokeless tobacco and cigars will fund a $32.8 billion expansion of the State Children's Health Insurance Program, providing coverage to an additional 4 million children.

"In a decent society, there are certain obligations that are not subject to tradeoffs or negotiation -- health care for our children is one of those obligations," Obama said at a signing ceremony at the White House.

It's not yet clear how hard the tax hike will hit tobacco companies.

Fitch Ratings, a bond rating firm, said it expects a 4 percent to 7 percent drop in cigarette sales this year.

Tommy Payne, spokesman for Reynolds American Inc., a tobacco company in Winston-Salem, N.C., said the company expects industry-wide volume declines of 6 percent to 8 percent.

David Sutton, spokesman for Philip Morris USA in Richmond, Va., said it was difficult to say how the tax hike would affect the company's bottom line.

The federal increase comes after a series of cigarette tax increases by dozens of states over the last five years. The trend has driven up cigarette prices and is expected to continue.

So far this year, 16 states have considered legislation to increase cigarette taxes, according to the National Conference of State Legislatures. Hikes are expected this year in states that have historically opposed raising cigarette taxes, including South Carolina, which has the nation's lowest state cigarette tax rate of 7 cents per pack, and Mississippi, third lowest with 18 cents per pack.

Richard Cauchi, health program director for the conference of state legislatures, said it's difficult to say how many of those proposed hikes will pass.

In 2007, tobacco tax hikes passed in 11 states. Last year, 20 states debated increases, but only two passed. They were unusually large -- a $1 hike in Massachusetts and $1.25 in New York. At $2.75 a pack, New York has the country's highest cigarettes taxes.

Two factors have the potential to spark another wave of tax hikes this year, tobacco analysts said. The prolonged economic downturn has created budget deficits in nearly every state. Lawmakers generally face less resistance to increasing 'sin taxes' than income taxes or sales taxes paid by everyone.

Job losses have swelled the ranks of the uninsured, and cigarette taxes are often pegged to pay for expansions of government health insurance programs.

The fact that Mississippi Gov. Haley Barbour, a former tobacco lobbyist, is backing a state tobacco tax hike "is the clearest indication yet that policy makers see the writing on the wall," said Pete Fisher, vice president for state issues for the advocacy group Tobacco-Free Kids.

"They have budget gaps to fill. Lots of governors see they can raise cigarette taxes without facing a backlash from voters who might oppose other kinds of tax increases," Fisher said.

Tobacco companies have fought the increases in every state. They argue that tax increases rarely bring in as much revenue as projected, because higher prices prompt some people to quit and others to buy untaxed cigarettes online or on Native American reservations.

Payne, the Reynolds spokesman, said the hike Obama signed Wednesday could hurt states that rely heavily on cigarette taxes. The volume declines prompted by the new federal rate will also cut state cigarette tax revenues, he said.

"They're not going to get the money they're expecting," he said.
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voiceofreason Says:

Fri, Apr 03, 2009 at 3:07 pm

fair and equal tax. that sounds fascinating!!! NOT!! right now, every man woman and child in this country is responsible for $22,000 to pay the federal budget and deficit. i have a family of four, me, wife, and two young children. with the income i have, i would LOOOOOVE!!!! to pay only $88,000.00 in income and luxury taxes. and to all people who don not believe in an escalating tax scale, as amended in the 16th amendment and the revenue act of 1913, BE CAREFUL FOR WHAT YOU WISH FOR!!!! lets see a working family of five earning $100,000. absorb $110,000 in present and future taxation. GOOD IDEA!!!! especially you sharky, you are the one who does not beleive in taxation upon a single group. from what i can gather from your posts, you are benefitting greatly due to taxation upon the upper class!!! lets try it your way for a while, i would LOOOOOVE it!!!!!! say goodbye to the middle class

Sharky701 Says:

Thu, Apr 02, 2009 at 10:17 am

The majority of people I know hate Anchovies on there pizza, does that mean we should put a special tax on anchovies and punish those who like ‘em? Would that really be fair to those who love anchovies? I think it’s just that simple. Why should it be any more complicated than than the rights to life, liberty, and the pursuit of happiness, as long as one gives the same freedoms to others that they were given.Thats my cut and dry philosophy offreedom and equality, for ALL, not just some.
President Obama, SHOULD KNOW AS WELL AS ANYONE THE WRONGFULNESS OF DISCRIMINATION, IN ANY FORM.
This is not just about the tax on tobacco, this is about every unfair consumer tax ever implented. This is about right and wrong, equallity, freedom, liberty, pursuit of happiness, true democracy, true justice and fairness, instead of the facade that we currently have inplace.

Sharky701 Says:

Thu, Apr 02, 2009 at 10:16 am

It saddens me deeply to think that so many would let freedom be taken away and not even blink an eye or give it a second thought. If one unfair discriminatory tax is allowed, what’s the next tax, going to be? What right, what freedom, what is the next liberty is our government going to take away from us, how soon, and with how little resistance will there be against these injustices? It’s almost like being raped by the government, and most Americans don’t wanna fight their attacker, they rather just bend over and say ok, rape me again and again.
But is it really the majority of the American people in control, or is it in reallity, the few with money, power, political offices, and their special interests telling us what we can and can’t do? Seems like we’re even getting screwed by the voting process of our so-called democracy, beings our votes don’t really count, they just give the electoral college a scale of how happy or dissappointed the public will be with their say so about who’s got the most votes and support, so they have way to screw us just enough to make us unhappy, but not enough to be ready to take up torches & beating sticks and start lynching politicians.
I believe that healthcare could just as easily if not even easier be financed by a 1 cent sales tax increase for all consumer products, and the tax
would be equally spread for the population, and so would the benefits. Non-discriminatory, fair, tax and healthcare. Everyone’s equal problem, everyone’s equal solution.
But civil rights is still a dream not a reallity. Discrimination, may be
less in context of race, religion, or sexual orientation, but what about the pursuit of happiness, and liberty?
Why can’t people be free to be who they want, and do what they want as long they don’t infringe upon other peoples’s freedom’s for the same?

Sharky701 Says:

Thu, Apr 02, 2009 at 10:14 am

I understand there needs to be healthcare for children, but selective taxation is discrimination. Putting the financial burden of the healthcare system on any one group of people is completely unfair and should not be tolerated. I DON’T believe it is right to unfairly tax any one group over another, no matter what the money is going towards. Why tax one group to pay for everyone else? WE ALL have a stake in this country, the problems and rewards should be shared equally, not singled out for one groups punishment and another groups rewards.
If America wants to allow this discrimination to continue, then we really aren’t any better off than we were before civil rights ever came along. If Americans allow the Government to infringe upon, and more or less outright control our individual rights and and freedoms, then we are no longer a free society, but rather a bunch of scared weaklings that can’t even stand up for the rights and freedoms our forefathers fought, bled, sweated, cried and died for.

TOMMYBYRD Says:

Wed, Apr 01, 2009 at 3:40 am

I, myself, am not a smoker. Take that statement as you will. I just find it sad that this nation that is already in over it’s head in debt keeps taxing it’s citizens. We are continuing to fall deeper and deeper into this pit. If we are as a nation in extreme debt, then why would we continue to tax citizens, “HARD WORKING” citizens at that, and they have more reason to fall into debt because they can’t kick the habit? I agree totally with itfeelslikesunday, just tax it all!
Keep taking away my freedoms Uncle Sam. You know exactly what you’re doing. As long as I can sleep in my bed at night and know that I am safe from being attack by “terrorists” then you can do as you please. This government make me sick. It’s unfortunate that a young person like myself will have to deal with what people before me left for generations to come. Our founding fathers would have not stood for this and we shouldn’t either.
And if you call smoking a “past time”, then that’s just disappointing.

marlin Says:

Tue, Mar 31, 2009 at 11:02 pm

wait4me—I like your cuteness. Making under 250K is the best place to be these day. Supose the fed pass the Cap and Trade tax, everyone who use fossil fuel have to pay for their carbon release.
What do you use to heat/cool/light/cook/travel? Being work under 250K, you have plenty of money left to buy wind mill, solar cell, update your house with highest energy star appliances, and also a couple of Stella electric car. With this Cap and Trade tax, all producers will absorb the cost and call it a lost intead of increase their price.
Further more, I love Obama’s plan to punish the rich guys by increase their tax. He even hand to them trilions of dolar so he can tax them even more. When alot of money sloshing around, hyperinflation set in, these poor guys who earn more than 250K can’t hide their money but have to buy gold and hard assess, in the mean time you don’t have to wory about your money being depreciate because you don’t have much left and praying your wage raise as fast

southernpride7 Says:

Sat, Mar 21, 2009 at 11:54 am

well i tell ya this just sucks. yea im a smoker. have been for 20 years. why do i have to pay for poor childrens health insurance. heck im poor too. i have 2 children that are poor. i pay for my childrens health insurance. think i could get on this free health insurance? probably not because i work. unlike some of these people with poor children. anybody know where to sign your poor children up? please let me know.

voiceofreason Says:

Sat, Mar 21, 2009 at 11:39 am

well sharky, i can see that you are a person that has no grasp of handling the truth. let me answer some of your questions. i do smoke currently, am trying to kick the habit, this luxiry is taxed. when the phila. eagles moved into their new stadium, i paid seat liscences, in addition, this fee incurred a taxation, again a luxury. i dont even wish to reveal the luxury tax that i forked over for my new boat i purchased last year. not to mention the taxes i pay for everyday luxuries most take for granted, cell phones, cable tv, satellite radio, not to mention the subscription services for boat electronics and gps. no even to mention the 36%, soon to be 39% federal tax (before write-offs) i am and will continue to pay. so let me be brief. i am more financially liable than that of the lower tax brackets, where most citizens are liable. however i dont sound like the cry baby you represent, even though i pay more of my money to the govt than that of you and the like to help others!

ickthus Says:

Fri, Mar 20, 2009 at 7:31 pm

voiceofreason? where did you not go to school.

Sharky701 Says:

Fri, Mar 20, 2009 at 2:14 pm

Hey voiceofnogoodreason!! and everyone else
, how the hell would you like it if we found what your favorite pastime was and then taxed it unfairly? and Yes I know the stupid government has been unfairly taxing singled-out groups for a long time , but I belive it should be changed back to fair taxation equal for all tax equal benfit from that tax. VIOCEOFREASON, IT’S PEOPLE LIKE YOU BEING EVER PRESENT AND OUTBREEDING THE INTELLIGENT AS TO WHY THIS PLANET IS GOING STRAIGHT FOR THE TOILET A LITTLE MORE AND AT A FASTER RATE EVERY DAY!!!!!!!!
I would love to implement an un-intelligence tax on you, and an unfair tax on you for being so inconsiderate of peoples rights! You and everyone who wants to tax others unfairly need your own medicine crammed, jammed, shoved, packed , and more down your throat!!!
How would you like that? tax you for not passing an IQ test at a high enough level? how bout tax you for every time you do or say something without consideration for equality?

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