A Collection of Thoughts » tobacco http://blog.ericfilson.com The Ramblings of Eric Filson Wed, 20 Jan 2010 14:29:34 +0000 http://wordpress.org/?v=2.8.6 en hourly 1 The Out of Control Taxation of Tobacco http://blog.ericfilson.com/2009/12/the-out-of-control-taxation-of-tobacco/ http://blog.ericfilson.com/2009/12/the-out-of-control-taxation-of-tobacco/#comments Thu, 03 Dec 2009 19:16:46 +0000 efilson http://blog.ericfilson.com/?p=25 Don't Tread on MeMost people aren’t even aware of why the cost of a pack of cigarettes is so high.  I’ve come across numerous articles and blogs with comments from people ranting when major cigarette manufacturers raise the cost on a pack by a few cents.  The problem with cigarette prices isn’t the manufacturers… in fact they’re the only ones justified to be raising costs since their costs of manufacturing are undoubtedly rising.  The real problem here is taxation from both the Federal and State Governments.

Once the crack down on the tobacco industry began, taxing tobacco quickly became an easy way for politicians to gain funding for programs that would not normally pass a vote.  It’s much easier to raise taxes on a product used by less than 50% of the population than it is to create new taxes on goods and services the majority of consumers use.

In January of 2009 the Obama Administration expanded the SCHIP Program adding $32.8B in funding.  You can probably guess where those monies are coming from but do you also know where they’re going?  A large part of this additional funding is going towards opening up this program to illegal immigrants.  I’m not too sure how the US Government thinks they have the authority to tax US residents to pay for illegal immigrants but that’s the way it’s going down.  This little expansion raised the Federal taxes from $0.39 to $1.01 per pack.

This doesn’t even touch on the out of control state taxes.  You can find state tobacco taxes ranging anywhere from Rhode Island’s whopping $3.46 per pack to South Carolina’s minimal $0.07 per pack.  Sadly, more and more states are beginning to raise their taxes and now cities are also beginning to jump on the bandwagon.  NYC has long had a  $1.50 per pack tax on cigarettes making it the most expensive place to buy a pack of cigarettes with a total tax amount of $5.26 ($1.01 Federal + $1.50 City + $2.75 State).  Oh and let’s not forget to pay tax on that tax because everyone loves sales tax!

If you were to tell one of our founding fathers that in the future citizens of the United States would be paying taxes in excess of 1000% of the cost of goods, I’m positive they would have spent a little more time drafting a few documents to limit federal and state taxation.  But how could they possibly have guessed this would happen when the majority of US citizens can’t even believe it themselves?

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