March 31, 2009
Cigarette Tax Increase
The Associated Press provides details on the cigarette tax increase that takes place today. The AP reports,
Tobacco companies and public health advocates, longtime foes in the nicotine battles, are trying to turn the situation to their advantage. The major cigarette makers raised prices a couple of weeks ago, partly to offset any drop in profits once the per-pack tax climbs from 39 cents to $1.01. Medical groups see a tax increase right in the middle of a recession as a great incentive to help persuade smokers to quit.
Tobacco taxes are soaring to finance a major expansion of health
insurance for children. President Barack Obama signed that health
initiative soon after taking office. Other tobacco products, from cigars to pipes and smokeless, will
see similarly large tax increases, too. For example, the tax on
chewing tobacco will go up from 19.5 cents per pound to 50 cents.
The total expected to be raised over the 4 1/2 year-long health
insurance expansion is nearly $33 billion. . . .
About one in five adults in the United States smokes cigarettes. That's a gradually dwindling share, though it isn't shrinking fast enough for public health advocates. The Centers for Disease Control and Prevention says cigarette smoking results in an estimated 443,000 premature deaths each year, and costs the economy $193 billion in health care expenses and lost time from work. Smoking is a major contributor to heart disease, cancer and lung disease. . . . .
Philip Morris USA, the largest tobacco company and maker of Marlboro, is forecasting a drop, but spokesman Bill Phelps said he cannot predict how big. Philip Morris raised Marlboro prices by 71 cents a pack early this month, and prices on smaller brands by 81 cents a pack. Other major companies followed suit. The pricing moves raised eyebrows. "That's nothing more than greed," said Kevin Altman, an industry consultant who advises small tobacco companies. "They weren't required to charge that until April 1. They are just putting that into their pockets." Responded Phelps: "We raised our prices in direct response to the federal excise tax increase, and people who are upset about that should find out how their member of Congress voted, and contact him or her."
Some policy analysts have questioned the wisdom of boosting tobacco taxes to finance health care for children. They argue that the fate of such a broad program should not depend on revenues derived from a minority of the adult population, many of whom have low incomes and are hooked on a habit. The tobacco industry is also warning that the steep increase will lead to tax evasion through old-fashioned smuggling or by Internet purchase from abroad. . . .
March 31, 2009 | Permalink
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