CEPR - Center for Economic and Policy Research


En Español

Em Português

Other Languages

Home Publications Blogs Beat the Press President Obama's Big Tax Hike on Working People

President Obama's Big Tax Hike on Working People

Tuesday, 18 September 2012 08:56

Thanks to the liberal media most of the public probably has not heard about President Obama's big tax hike on working people, Dennis Cauchon at USA Today is on the case. Just 16 days into his term in office, President Obama signed a bill that raised a tax that primarily hits working people. To date this tax hike has meant more than $30 billion out of taxpayers' pockets.

If you missed this one, it's probably because you don't smoke. Obama raised the tobacco tax. It had the effect of leading to a sharp decline in smoking, with the number of smokers down by close to 3 million since 2009.

This sort of tax is always a mixed bag. There are many people who are genuinely hooked on cigarettes and are already struggling to pay their bills. Making their lives more difficult can't be a good thing.

On the other hand, insofar as higher cigarette prices get people to stop smoking or even better keeps them from ever starting, it's hard not to see that as a huge positive. Millions of people will enjoy longer healthier lives because of this tax increase. That's certainly good news. 

Anyhow USA Today deserves credit for giving this one some attention. It matters a lot more than many other items that have arisen in the presidential campaign.

Comments (7)Add Comment
written by Brett, September 18, 2012 9:23
I have some relatives in Maine who are poor, uneducated and live in subsidized housing who can't get off cigarettes. I don't think they possess the awareness factor necessary to know that "oh, the cost of cigarettes has gone up because of a tax that is intended to encourage people to quit." All they know is they get a $1200 check from Social Security every month, then they pay their bills buy a sack of groceries and all that remains is $50. That's the routine every month. Obama's cigarette tax has reduced that measly disposable income even further while not doing anything to get them off cigarettes (they simply enjoy smoking, I don't think they'll ever quit -- some people are like that).
Yes but don't blame the victim
written by Bill B., September 18, 2012 9:42
Yes, but, but we need to beware of developing a blame the victim mentality. We don’t like smokers, therefore they deserve what they get; if fact, we should just tax them so they don’t overburden the health care system and let them die. It’s very patronizing to see smokers taxed “for their own good” without any suggestion smokers or ex-smokers get anything in return from these taxes. $30 billion buys a lot of nicotine patches, even at the extortionate rates big pharma gets for them. If your gas tax was hiked and put in the general fund without a few roads and bridges, there would be howls.
written by tom, September 18, 2012 9:44
Here is the alternative to taxing cigarettes at retail that would discourage smoking.

Many corporate health plans have smoking cessation programs, maybe we could have a program that pays people to quit, either directly or by reducing their health premiums. The government could run the program for Medicare and Medicaid, and it could subsidize the program for private insurance companies. It could be paid from a surtax on tobacco company profits and revenues.

This would require more bureaucracy than just raising the tax per pack, but it would avoid the problem of making life more difficult for poor smokers.

(Although, one could argue that raising the tax only hurts poor smokers if they don't quit, and not quitting is their choice...)
Kids, the next generation, are worth it
written by David, September 18, 2012 12:07
The real point: teen smoking will be a thing of the past. http://www.lung.org/stop-smoki...start.html
That's the real payoff, since most smokers begin when they are young, 9 out of 10 smokers begin smoking before the age of 18. And the savings in healthcare costs for the next generation will be substantial, on the whole. And that's a good thing. Not all taxes are bad, nes c'est pas? So, the tax lets legacy smokers keep on smoking, while cutting down on the size of the next generation of smokers. Only wealthy kids will be smoking, but they'll have their trust fund to pay for their death care, not the government, right?
what the tax funds ...
written by David, September 18, 2012 12:13
According to the American Lung Association http://www.lung.org/stop-smoki...on-of.html "the law allocates payment of all tobacco product-related FDA costs among the manufacturers of cigarettes, cigarette tobacco and smokeless tobacco products sold in the United States, based on the manufacturers' respective shares of the entire U.S. tobacco product market."
tax cigarettes okay that's good, what about country club memberships & private aircraft, let's tax these things too
written by mel in oregon, September 18, 2012 4:57
okay a younger person can bray all they want about why a lot of old people still smoke. the answer? they grew up in a different age. a lot were in ww2 or korea & didn't know if they would make it back. cigarettes helped ease the horror. back in the 50s nearly everyone in the service smoked. so did a significant percentage of college students. television had medical doctors talking about the health benefits of smoking. the average person of today in their 20s,30s or 40s has no idea what the older generation went through. is smoking bad? silly question, lung cancer, emphysema, & heart disease reduce life expectancy significantly. that's why all health or life insurance policies charge smokers a lot more. just cut elders a little slack, they went through a lot.
tyranny of the majority
written by RRaccoon, September 18, 2012 7:08
Taxes on cigarettes pay for more than they costs that cigarette smokers inflict through medical expenses paid by governments and the cost of paying for anti-smoking campaigns. They are taxed at exorbitant rates because they can. The concept of tyranny of majority plays a role in this. Because it's now socailly unacceptable to smoke, it can simply be taxed by those who don't and disapprove. Cigarettes and other tabacco products of course should be taxed but not to the degree they are. It's another example of a regressive tax that unfairly is carried by those with less income.

Write comment

(Only one link allowed per comment)

This content has been locked. You can no longer post any comments.


Support this blog, donate
Combined Federal Campaign #79613

About Beat the Press

Dean Baker is co-director of the Center for Economic and Policy Research in Washington, D.C. He is the author of several books, his latest being The End of Loser Liberalism: Making Markets Progressive. Read more about Dean.