Yesterday, April 1, the new SCHIP expansion went into affect further expanding socialized medicine for children by increasing all tobacco taxes. The federal excise tax on cigarettes almost tripled, from 39¢ to $1.0066 a pack. Every other tobacco product also had a tremendous tax increase, but the most drastic was the increase on Roll Your Own (RYO) tobacco. RYO taxes went from $1.0969 per pound to $24.78 per pound. An increase of over 2000%. Never in American history has one product had such a tremendous tax increase. It is literally unprecedented. There are multiple reasons that this bill is a tremendous disaster, and I will try to address all of them here.
1. Taxing the Minority. It is an unfair and regressive tax on a minority. About 20% of Americans smoke. The median income of smokers is $36,300. President Obama said during the campaign on Sept 12,
“I can make a firm pledge, Under my plan, no family making less than $250,000 a year will see any form of tax increase. Not your income tax, not your payroll tax, not your capital gains taxes, not any of your taxes."Approximately 90% of smokers make less than $250,000. His “pledge” was a flat out lie.
2. Killing the goose who laid the Golden Egg. As tobacco taxes continually increase, on both federal and state (and even municipal) levels, less people are smoking. Every time there has been a tax increase on tobacco products in the last 15 years or so, revenues collected from cigarette taxes have gone down.
3. Hypocrisy. Health advocates want people to quit smoking to make a healthier America. Yet they also want smokers to pay for Health Insurance programs for millions of children. Some studies say that Congress will need Nine Million new smokers to generate enough revenue to support SCHIP in the Long Run.
4. The Black Market. The more tax increases on tobacco, the more the black market grows. Smokers want to continue smoking, and criminals find ways to either counterfeit or import foreign cigarettes and sell them on the black market on which NO tax revenues are created.
5. The Economy. Our economy is struggling. Unemployment is skyrocketing. Over a million people are employed in the tobacco industry in some form or another. Our company alone is shutting down 20% of our stores and laying off large amounts of people who never would have been jobless if not for this bill. These are good hard working people, who would have continued to be employed in a difficult economy if this bill had not been signed. This bill puts people out of work who otherwise would have been employed in a difficult recession.
6. Unprecedented taxes. These tax increases are unprecedented. Never have taxes on a single product been increased so dramatically. There is also a measure in the bill instituting a “floor stock tax.” This means that every product in inventory as of April 1 (yesterday), our company has to pay the difference in the old rate to the new rate. There has never been a floor stock tax on any product in American history. This provision will give our company a $1 million+ tax bill to be paid to the government by August. There is a $500 tax credit for every company, but that is such a ridiculously small amount it is laughable.
7. The Consumer. Just like every other tax on businesses in history, this tax gets passed on to the consumer. The average American smoker will end up paying every cent of this tax.
8. The SCHIP Program. SCHIP was designed to provide health insurance for poor children. I’d argue that this is too large of an expansion for socialized medicine on its own, except its not just for poor children. In New Jersey for example, SCHIP pays for coverage for families with incomes as high $74,200. This is poor?
Sorry for the length, but this is a monumental disaster on a multitude of levels. Tobacco issues are obviously close to my heart, my families livelihood is at stake. Where is the freedom to allow people to make their own choices, good or bad. I could say more, but I’ll stop there for now. I will definitely talk about this again.
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