President Joe Biden makes remarks to promote his infrastructure spending proposals, in Arvada, Colo., September 14, 2021. (Leah Millis )
President Biden promised not to raise taxes on people making less than $400,000 per year. He has actually said that the middle class would see a tax cut under his “Build Back Better” agenda, and that “all of it” — that’s 100 percent, for those of you keeping score at home — “will be paid for by the wealthy paying their fair share.”
That is, unless you make choices that progressives disapprove of. Then, no matter how much money you make, you’re apparently fair game for a tax increase.
Democrats want to raise about $100 billion over the next ten years by raising taxes on tobacco products and introducing new taxes on vaping products. Tobacco usage is not a rich-people thing; in fact, it is quite the opposite. About 14 percent of American adults overall are smokers, but 21 percent of American adults living in households making less than $35,000 per year are smokers.
Democrats have tried to wiggle their way out of this clear violation of Biden’s no-tax promise. According to the Washington Post:
Democrats have argued their efforts do not violate Biden’s pledge. A White House official, speaking on condition of anonymity to describe the administration’s thinking, said smoking is not a required cost for working families and the introduction of higher taxes would not directly affect their incomes. The aide also highlighted the public health imperative behind the idea, given the well-known dangers of a practice they are trying to discourage.
There’s no display of confidence quite like refusing to go on the record when explaining to the American people why your policies are a good idea. One suspects they know they’re full of it by saying that Biden’s pledge isn’t being violated. The Post also asked Howard Gleckman, a tax scholar at the left-leaning Urban-Brookings Tax Policy Center, if the proposals violated Biden’s pledge, and he answered, “Absolutely, no question.”
You might think it’s just one excise tax; how big an effect could it possibly have? The taxes Democrats have proposed, however, would be very significant. They want to double the federal excise tax on cigarettes and then raise every other tobacco tax to match the new cigarette tax. According to the Tax Foundation’s Ulrik Boesen, that would mean a 2,000 percent increase in the tax rate for chewing tobacco, for example. Boesen also looks at how the Democrats’ proposals would affect low-income Americans. He estimates that, combined with average state-level taxes, a pack-a-day smoker making $35,000 per year would pay 5.2 percent of his or her annual income in tobacco taxes if the Democrats’ proposals are adopted.
Boesen also points out that the taxes are not indexed to health risks. “The legislative intent of achieving parity across a wide product portfolio containing non-combustible and non-tobacco products would hurt consumer access to harm-reducing products,” he writes. “While more research relating to the potential harm-reduction qualities of vapor and nicotine products is needed, the current consensus is that these products are less harmful than traditional combustible tobacco products.”
An excise tax is a bad way to fund general obligations. The tax base is necessarily narrow, so the revenue is often unstable. This is especially true for sin taxes, like the taxes on tobacco. The whole point of the tax is to get people to stop using tobacco products. Fewer people using tobacco products means fewer people paying tobacco taxes. The more successful the tax is in discouraging tobacco use, the less revenue it raises.
Tobacco taxes are especially susceptible to tax avoidance as well, since smuggling tobacco products is relatively easy. There’s already a massive black market in smuggling cigarettes from states with low tobacco taxes, like Virginia and North Carolina, to states with high tobacco taxes, like New York and Connecticut. Making international smuggling more attractive by jacking up the national tax rates is only in the interest of criminals.
So raising tobacco taxes in the way Democrats have proposed directly violates one of Biden’s foremost promises, raises taxes in an extremely regressive way that’s not linked to health effects, and creates an unstable revenue source susceptible to lots of avoidance strategies. In the past, policies that would violate Biden’s no-tax pledge, like raising the gas tax or introducing a carbon tax, have met with heavy resistance from Democrats. That resistance has been more subdued so far on tobacco taxes.
Most everyone in the United States pays for gas, so the population affected by a gas-tax increase is very large and evenly distributed throughout the country. That’s not the case with tobacco taxes. A relatively small number of people pay them, and it’s hard not to notice where they live. The states with the highest smoking rates, according to the CDC, are, in order, West Virginia, Kentucky, Arkansas, Indiana, Tennessee, Ohio, Mississippi, Louisiana, Oklahoma, Missouri, Alabama, North Dakota, Alaska, South Dakota, Michigan, Wyoming, South Carolina, and Montana.
What do all of those states have in common? They all cast their electoral votes for Donald Trump in 2016, and all but one did in 2020 as well. Tobacco taxes present progressives a unique opportunity to raise taxes on people whose choices they disapprove of and who disproportionately voted for the other guy in the last election. It’s nanny-state instincts amplified by tribalism.
Smoking is unhealthy, and it imposes costs on others through the health-care system. But the Democrats’ proposals are not grounded in health-based calculations. They are grounded in the apparent belief that smokers are a revenue piñata that politicians can bash open to fund their preferred policies.
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