New Tobacco Tax Hike One of Many Shards of Glass in Obama Budget


Posted by Will Upton on Friday, April 5th, 2013, 4:04 PM PERMALINK


Though the President will not officially release his 2014 budget plan until next Wednesday, details of the plan are already starting to materialize.

Leaked on the day Bureau of Labor Statistics revealed job creation in March was less than half of what economists had expected, the plan is expected to outline a bevy of crippling tax increases.

Notably, the President is proposing once again to fund expansions of federal programs through tax hikes on tobacco products.

The plan will propose an increase in the federal excise tax to fund an expansion in pre-k programs. Without details, it is impossible to know what kind of price tag this proposal carries. However, the progressive Center for American Progress has estimated such a program could cost $100 billion over ten years.

The Congressional Budget Office estimated last year that a 50 cent increase on cigarettes would net less than half that amount in new revenue. What's more, one only needs to look to the states to see that tobacco taxes are a declining revenue source. Washington, D.C. raised its cigarette tax by $.50 in 2009 only to see an 11 percent net decline in cigarette tax revenue. South Carolina added $.57 to each pack of cigarettes in July 2010. Despite the rate increase, records show a decline in cigarette tax revenue in South Carolina since that time.  With tobacco tax revenue showing steady signs of permanent decline, tobacco taxes just act as placeholders for future tax increases.

It is important to note that these overwhelming costs would hit the populations least able to afford it. A tobacco tax falls squarely on the shoulder of lower-income Americans. With millions of Americans either unemployed or under employed, it is important to remember that this is a tax increase that will hit people making on average only $36,000 a year.

This is just one in what will be a litany of proposals to increase the size of government. We'll have the full rundown of the President's proposal when it is finally released.

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