President Biden and his political allies have long promised not to raise taxes on anyone making less than $400,000 a year. But their new plans for increasing taxes on cigarettes and vaping products would stretch that pledge far past its breaking point.
The tax increases are included in the newly released House Ways & Means Committee proposal to raise trillions in new tax revenue. The push to raise taxes comes as progressives in Congress seek to spend $3.5+ trillion on a “human infrastructure” package that includes everything from Green-New-Deal-esque climate change measures to an unprecedented expansion of the welfare state. In their push to squeeze out more revenue to fund all this spending, legislators are turning to cigarette and vaping taxes.
“Millions of Americans who smoke could soon see an increase in their prices, as Democrats target tobacco and nicotine to help finance their $3.5 trillion economic package,” the Washington Post reports. “The new proposal put forward in the House this week would… hike existing federal levies on cigarettes and cigars while introducing new taxes on vaping.”
The Democratic members of Congress pushing these tax increases claim they would raise $100 billion in new tax revenue. Yet this plan is deeply misguided. Here are three glaring problems with proposals to raise taxes on cigarettes and vaping.
1. Highly Regressive Nicotine Taxes Hurt the Poor
Progressive politicians often claim they only want to raise taxes on “the rich.” Yet these proposed taxes would undoubtedly hurt poor and working-class Americans the most. According to the CDC, “people living below the poverty level and people having lower levels of educational attainment have higher rates of cigarette smoking than the general population.” And research shows that low-income people spend a higher percentage of their income on cigarettes.
This means that hiking tobacco taxes would punish the same working-class Americans that President Biden and his Democratic allies promised to shield from tax increases—and further burden those who can least afford it.
2. Unintended Consequences and Black Market Backlash
Beyond the mere financial costs these taxes would impose on citizens, the proposals could seriously backfire. For example, vast increases in cigarette taxation could fuel the black market for street cigarettes. This would risk increased contamination or dangerous products, increased gang activity, and more potentially perilous interactions between citizens and police. (Remember Eric Garner?)
And adding more taxes on vaping products could have life-threatening consequences. While imperfect, vaping products such as e-cigarettes are much safer than traditional cigarette smoking and do not cause lung cancer or contain the same level of carcinogens. Yet taxes or regulations on e-cigarettes have consistently pushed more people back toward the more dangerous habit of traditional cigarette smoking.
3. Unlikely to Raise Stated Tax Revenue
Some might be willing to accept these proposed tax increases because they favor the spending proposals, and want to raise $100 billion. But even this can’t be taken for granted. Because of their adverse unintended consequences, nicotine taxes often fail to raise their projected revenues. As Tim Andrews of the anti-tax advocacy group Americans for Tax Reform notes, “tobacco tax increases almost never reach the projected revenue goals: Only three out of 32 state tobacco increases studied met tax revenue estimates.”
This means that when revenue receipts ultimately fall short, they’ll be back demanding more out of our wallets in no time.
As Nobel-Prize-winning economist Milton Friedman famously said, “there’s no such thing as a free lunch.” Everything must be paid for somehow by somebody.
Claims from progressive politicians that vast government spending can be financed solely by taxing the rich are politically convenient fiction. The reality of increasing government spending is that the taxman almost always finds his way back to everyday people.
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The post 3 Glaring Problems With Congress’s Plan to Raise Taxes on Cigarettes and Vaping was first published by the Foundation for Economic Education, and is republished here with permission. Please support their efforts.