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Politics : Just the Facts, Ma'am: A Compendium of Liberal Fiction -- Ignore unavailable to you. Want to Upgrade?

To: Sully- who wrote (70735)	4/1/2009 9:09:56 AM
From: Sully-	Respond to of 90947

Taxing the poor to help the poor Betsy's Page Today is the day that the new federal tax on cigarettes goes into effect rising from 39 cents to $1.01 on each pack. This is a tax that will most heavily on the poor since they are more likely to smoke. Brad Schiller describes the economic effects of that tax on the poor. <<< 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. Mr. Obama prefers to tout his tax cuts for low-income households. But his "stimulative" Make Work Pay tax cut gets dribbled out at $8-$10 a week. A pack-a-day smoker will pay half of that back in higher cigarette taxes. Smokers getting welfare, unemployment or disability checks instead of paychecks won't get as much in tax cuts, but they will still pay the whole cigarette tax increase. Anyone concerned about widening income inequality should have second thoughts about this distribution of the tax burden. 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. >>> If the goal of this tax was to decrease smoking, that would be fine. But this tax is targeted to pay for the S-CHIP insurance plan for uninsured children. You can't have both goals: decreasing the number of smokers and hoping to sock those same smokers for enough money to pay for children's health care. You're basing the finances for this expansion of health insurance on a diminishing base. And now my state's governor, North Carolina's Beverly Perdue, is considering what was once unthinkable - a massive increase in our own taxes on cigarettes. <<< Perdue, a Democrat, wants to raise the state tax on cigarettes by $1 -- from the current rate of 35 cents a pack to $1.35. That $1 increase would be on top of a 62-cent increase in the federal tax on cigarettes passed by Congress earlier this year and signed by President Obama. The federal increase will take effect April 1. Reynolds, the tobacco giant based in Winston-Salem, said yesterday that the proposed state increase combined with the federal increase would cause the average retail price of cigarettes in North Carolina to grow to almost $5.50 a pack. >>> Once again, this is targeting the poor to pay for the state's deficit as well as the state's health care costs. This might work in the short-term, but it is no long-term way to bring the state's deficit under control. I have no problem in raising the taxes on cigarettes if our goal is to reduce the number of people who smoke. If the increased cost will stop kids from taking up the habit to begin with - fine. But don't base our budget, particularly health care costs which will be growing whether 10% of today's kids start smoking or not. That is just evading the long-term problems with our budget. betsyspage.blogspot.com