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Broken Obama Promise Takes Effect

From Sandra Fabry on Wednesday, April 1, 2009 6:25 PM
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Today, on April 1, 2009, one of President Obama's first broken campaign promises - the promise not to raise taxes on anyone making less than $250,000 - takes effect in the form of the federal excise tax increase on tobacco products contained in the State Children's Health Insurance Reauthorization Act of 2009.

As of today, smokers will have to pay an additional tax 61 cents per pack of cigarettes, amounting to a 156 percent increase - and the very people President Obama promised to spare from higher taxes are bearing the brunt of the cost, since (as ATR has been pointing out on numerous occasions)

  • 55 percent of smokers are “working poor”
  • One in four smokers live below the poverty line
  • On average, smokers, whose median income is a little more than $36,000, make about 30 percent less than non-smokers.

In today's Wall Street Journal, Brad Schiller, professor of economics at University of Nevada, Reno raises similar points:

The fairness issue is particularly troubling. According to the Centers for Disease Control and Prevention, only one in five Americans smokes, so the excise targets a minority -- and over half of all smokers are low income, and one of four are officially classified as poor.

Of course, the White House now claims that President Obama's promise not to raise taxes on anyone making less than $250,000 was a qualified promise. According to a White House spokesperson:

The president's position throughout the campaign was that he would not raise income or payroll taxes on families making less than $250,000, and that's a promise he has kept.

However, that is not what he said, as this video proves.  Words matter, Mr. President, and a promise is a promise. 

However, this is by far not the only problem.  This tobacco tax increase was enacted as a funding source for the expansion of an already flawed program - SCHIP.  Funding  an expansion of this program on an already-declining revenue stream is irresponsible. Ultimately, the tobacco tax increase serves as a placeholder for the next tax increase that will be required to sustain funding levels once the revenues from the tobacco tax dry up. 

And there is a ripple effect that will be felt in the states, too, as Schiller explains:

We should also note how this tax increase affects state finances. State governments rely on their own cigarette excise taxes for hefty revenue streams. In 2008, according to the National Tax Foundation, state governments took in $15.4 billion in cigarette taxes. Hard-hit Michigan, Pennsylvania, and California each took in over $1 billion; New York and Texas took in $1.5 billion each.

Higher taxes discourage cigarette sales. Nobel economist Gary Becker pegs the long-run price elasticity of demand for cigarettes at 0.8 -- i.e., a 10% increase in price causes an 8% decline in unit sales. The Obama tax hike translates into a 13.3% increase in the average pack price. That implies a 10.6% decline in unit sales -- which the National Tax Foundation has calculated adds up to a $1 billion overall revenue loss for hard-pressed states.

Because Southern states have low tax rates (most less than 40 cents per pack), the federal tax hike raises their cigarette prices by a larger percentage and thus cuts deeper into their unit sales. New York, by contrast, has the highest state taxes ($2.75 a pack) and prices, so it gets hit less in percentage terms. The Tax Foundation estimates a 12.6% revenue loss for South Carolina this coming fiscal year, and a 6.7% loss for New York.

None of this is good for the economy. Consumers and state governments are already having a tough time making ends meet. Burdening them with a new $38 billion tax and a $1 billion cut in revenues isn't going to help create jobs.

And while I wish all this was an April Fool's joke, it is not.

Permalink | Email | Print | Tags: TAXES, OBAMA, TOBACCO

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Comments

Is you quit smoking then you wouldn't be broke.
>> Michael Thursday, April 2, 2009 7:10 AM

If everyone quits smoking America will be MORE broke... If every Adult American (@230M)bought a pack of cigarettes per day (of course they don't have to smoke them) Federal tax gain: 230 Million X $1.01/pack X 365 Days = $85 Billion Dollars per year State (Average-Countrywide) tax gain: 230 Million X $1.19/pack X 365 Days = $100 Billion dollars per year
>> Colonist Thursday, April 2, 2009 8:12 AM

Why should smokers be the ones to pay for insuring everyone else's children? If insuring children is so important it should be everyone's responsibility.
>> Ron Thursday, April 2, 2009 8:49 AM

By Micheal's logic the government could tax investment at 100% and "if you didn't invest you wouldn't be broke", gas at 500% and "if you didn't drive you wouldn't be broke" or fast food at 100% and "if you didn't eat fast food you wouldn't be broke". And so on. Just because the government can do something to target a minority of people doesn't make it right. First they came for the Smokers and I did not speak out because I was not a Smoker...
>> Joe M Thursday, April 2, 2009 9:34 AM

I agree with Ron, it is a problem that should involve cooperation among everyone, not a targeted punishment on the few.
>> mitch Thursday, April 2, 2009 1:30 PM

Smokers said this would happen. I don't smoke either but I didn't vote for the trash party either. Bahama is a jack@ss as well is ried and polskie. There will come a time when people will say enough. But it will be too late. It is already too late.
>> PoliticalRectum Thursday, April 2, 2009 10:33 PM

I say that we tax condoms. Better yet, tax TV shows!! To watch and produce. Yep that would do it.
>> PoliticalRectum Thursday, April 2, 2009 10:37 PM

well, they are going to tax those hard working farmers for their Cattle "Cow Emissions" can you believe it. I say term limits get rid of all of them. Some day we will be wearing meters on our bodies and getting taxed for our emissions!! they suck money out of anything and everything they can! Speak up America . we have to stop this. all of it.!!!
>> jesse Friday, April 3, 2009 6:26 PM

Being a smoker, these new taxes have seriously put me in a bind with the thought of quitting and giving it all up. What the majority of people don't realize is that taxes for everyone are getting out of hand, not just with cigarettes. Taxes were implemented back during WWI as a source for funding that war, AND were supposed to have went away with the conclusion of that war. Duh....they didn't.
>> Dena Sunday, April 5, 2009 7:05 PM

(cont.) The Declaration of Independence says ".... Governments are instituted among Men, deriving their just powers from the consent of the governed, — That whenever any Form of Government becomes destructive of these ends, it is the Right of the People to alter or to abolish it, and to institute new Government, laying its foundation on such principles and organizing its powers in such form, as to them shall seem most likely to effect their Safety and Happiness."
>> Dena Sunday, April 5, 2009 7:08 PM

(cont.)......We have the right to stand up to our government and say ENOUGH, we are sick of what you are doing and we will not stand for any more. They impose laws on us that we never voted on, they impose taxes on us that we never voted on. Just so that the greed B@st@rds can stick more money in their own pockets and take it away from people like we who live paycheck to paycheck and hope daily that you can make ends meet and still put food on the table for our children.
>> Dena Sunday, April 5, 2009 7:14 PM

Nah, tax BEEF. It is more harmful than soda or tobacco - just Google: Beef hormones cancer, beef hormones autism, beef hormones prostate cancer, beef hormones cognitive impairment, beef hormones obesity, beef hormones breast cancer, beef hormones heart problems, beef hormones premature puberty, etc..... Tax the BEEF!
>> Rosiemeow Tuesday, June 16, 2009 3:02 PM

If everyone quit smoking, the Life Insurance companies would go under. Google "Life Insurance invest tobacco". Funny - NY Life - they provide Life Insurance for AARP - and invest 13 Million in tobacco. They say they see nothing unethical about it. And they are the company with the least amount of investments in tobacco. Prudential, Mass Mutual (right in Ted Kennedy's back yard - and he's drafting our current healthcare reform), on and on. Job security at it's best.
>> Rosiemeow Tuesday, June 16, 2009 4:10 PM

And he also wants to tax SODA and FAST FOOD RESTAURANTS. How about taxing all you can eat buffets instead? Can't cook? Maybe Michelle Obama can organize a special task force to teach young American women how to cook in 30 minutes. Oh, wait, Rachel Ray already did that. How about taxing plastic surgery procedures - face lifts, tummy tucks - all cash business. That would work, right? Don't see too many poor getting that done. Instead of Obama we may need to start calling him Mama since he's not letting us have what's "bad" for us, and seems to know best. Like my Dad always said, "Do as I say, not as I do". : )
>> Rosie Tuesday, June 16, 2009 4:20 PM

Do not forget one thing, my friends - the majority voted this administration in. Mostly young Americans. Mostly young American women. Would you like cheese with that whine?
>> Rosiemeow Tuesday, June 16, 2009 4:24 PM

We are now seeing "The *King* of PORK BARREL SPENDING" (Comandante Obama and his Democrat regime) at it's best, and we will never see it like we have in the past six months and are about to see in US history. Google it and weep, because this administration hasn't even gotten started yet. The good news is, at least AOL is now reporting things as they truly are: http://travel.aol.com/travel-forum/topic/d5eb201b685248d7bff81ce52a305550/7b44b30ffad040bb87a0c381c31f7e40/58e81dbfe9ba478cb990c079b07857c2 ***
>> Rosiemeow Wednesday, July 1, 2009 12:09 AM

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