Under the surface of a gargantuan $3.5 trillion spending plan, House Democrats have proposed a tax hike on tobacco and nicotine products to fund this insanely large appropriation proposal.
WASHINGTON — Congressional Democrats have proposed a tax hike on tobacco and nicotine products to help fund President Joe Biden’s $3.5 trillion federal spending package. This measure may increase current federal levies on cigarettes, cigars, roll-your-own products, and electronic cigarettes, and known vaping products.
“But ultimately it would fall heavily on tobacco consumers—many of the group that earns less than $400,000 that President Biden pledged would not see a tax increase,” writes Ulrik Boesen, a senior policy analyst on excise taxes at the Tax Foundation, in a blog post published to their website on September 13, 2021.
“If the administration considers a tobacco tax hike a tax on consumers as it did for a gas tax hike, the proposal may be short-lived,” Boesen said. “Doubling the cigarette tax rate yields a high rate, but tax parity across all products results in increases on other tobacco products that are significantly higher.”
CNBC.com online reports that companies usually pass the increased costs of so-called excise taxes to their customers, meaning higher prices for the actual goods at the point of sale.
This means that the increase in tobacco and nicotine products, including vapes, will see an exorbitant increase at a sale point.
“The level ([the] dollar amount) of the excise tax should reflect the harm of nicotine products relative to traditional tobacco products,” Boesen added. “The Royal College of Physicians released a report recommending a tax of 5 percent relative to the tax on combustible tobacco. To illustrate how that would work in the context of this proposal: if a pack of cigarettes is taxed at $2.00, the vapor products tax should be $0.10 per pod for closed systems, since a pod is a substitute for one pack of cigarettes.”
