House Democrats’ tax hike on tobacco may violate Biden’s pledge
A man smokes with the electronic tobacco heater IQOS (I quit ordinary smoking) of the tobacco company Philip Morris.
Sebastian Kahnert | picture alliance | Getty Images
House Democrats have proposed a tax hike on tobacco and nicotine products to help fund their $3.5 trillion spending plan.
The measure may increase current levies on cigarettes, cigars and roll-your-own and smokeless tobacco, according to a plan summary. New taxes have been proposed for vaping products.
Companies typically pass so-called excise taxes — levies on specific goods such as alcohol, gasoline, soda and tobacco — along to customers with higher prices.
These tax increases may bring in more than $96 billion in revenue over the next decade, according to estimates from the nonpartisan Joint Committee on Taxation.
While health advocates applaud the plan, opponents say it violates President Joe Biden‘s promise not to raise taxes on Americans making less than $400,000 per year.
Ulrik Boesen (a senior policy analyst on excise tax at the Tax Foundation) said that a tobacco tax was “probably the most regressive” tax. It is a tax that applies to people with incomes below $400,000, there’s no doubt about it.
CNBC reached out to the White House for clarification but they did not respond immediately.
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Americans living below the poverty line have higher smoking rates than the general population, according to the Centers for Disease Control and Prevention. They may also smoke for twice the time as someone with triple incomes.
Boesen estimated that doubling the tax on cigarettes could result in someone who smokes a pack of cigarettes per day spending an additional $400 annually, depending on their location.
However, there may be greater issues with the proposed tax hikes, as Boesen detailed in a Tax Foundation analysis.
“We’re talking about $100 billion levied from a fairly narrow section of the market — just tobacco nicotine products,” he said. It’s risky to depend on this revenue for the long term because there is a decreasing number of smokers every year.
Boesen indicated that FDA is reviewing vaping applications for authorizations and denied over 90%.
Boesen stated, “A substantial chunk of that market” is in danger. “And then obviously the [tax] revenue is at risk.”
There are more than 34 million smokers in the U.S. and over 16 million are living with a smoking-related disease, according to the CDC. Smoking is the number one cause of preventable death, disability and illness in the United States. It causes 480,000 deaths annually.