All the pretenses (and gowns!) are not true. The Democrats have made many promises about taxes for the wealthy and pledged that the poor would not be subject to any tax increases. However, they are moving full steam ahead with a significant tax hike on America’s poorest 20%.
President Joe Biden has pledged not to raise taxes on anyone making less than $400k, but when you look at the data provided by the left-leaning Institute on Taxation and Economic Policy, their own data shows a bigger tax burden on the lowest income earners in America when it comes cigarette and tobacco tax increases. In the Democrats’ tax plan, there is a 1700% hike in the federal tobacco/nicotine tax that is supposed to raise about $100 billion in new revenue.
ITEP’s data shows that will be a bigger tax burden on the low-income earners far more than it would affect the higher income earners.
The Child Tax Credit expansions and the Earned Income Tax Credit expansions will be criticized by many. These are only seen once per year. The numbers are bigger and more noticeable then, but it’s a killer on a more regular basis for the tobacco taxes that will be paid at the register for the bottom 20 percent, especially in the midst of a potential recession that features high inflation, high gas prices, and regular supply chain failures and shortages.
But this isn’t just about the bottom 20 percent (or the rest of the population that earns under $400,000 per year). It will be a significant impact on farmers. Kentucky Governor Andy Beshear is already strongly opposed to this. Also, Virginia is the most prolific tobacco-producing state in America. It’s also the home of tobacco giant Altria, which will probably lay off a bunch of people if the tax hike goes through.
If that’s not enough for the Democrats, organized labor is coming out pretty hard against this particular tax hike, as well. There’s one group, the union representing workers at a unionized Swedish Match (not-big-tobacco-tobacco-
Something else to be considered here: Taxing nicotine doesn’t actually prevent harmful behavior, according to the Tax Foundation.
A tax based on nicotine content could favor lower-nicotine liquids, and encourage greater consumption of the liquid. For instance, a vapor pod that has a nicotine content of 3 percent and contains 1 ml of liquid would be taxed at $1.67 whereas a vapor pod that has a nicotine content of 5 percent and also contains 1 ml of liquid would be taxed at $2.78 even if there is no difference, or even a negative differential, in broader health effects of the two pods.
To avoid these problems, nicotine proxy should not be used. Furthermore, nicotine content does not directly determine how much nicotine is absorbed. This depends on the delivery method. The design differences of electronic cigarettes can have enormous implications on how much nicotine the user absorbs. There are many different nicotine products, which can be used in electronic cigarettes. Because of the incorrect definition of nicotine products, the bill will tax nicotine pouches at extremely high rates. These nicotine products are a new product that is used similarly to snus, or dipping tobacco. Because nicotine pouches have more nicotine, the tax is levied at a milligram rate. These products need higher nicotine levels to satisfy customers. Because the rate of nicotine absorption in the mouth is slower that through the lungs. However, a higher level of nicotine does not necessarily mean higher absorption.
What’s strange is that while smoking is routinely considered the most harmful way to consume tobacco, as the Tax Foundation points out, but it is the least-impacted by the tax hikes proposed by the Democrats. It’s almost as if they are trying to maximize the harm of cigarettes and tobacco products.
The use of tax as a tool to change behavior is not a winning strategy. It makes it impossible for the Democrats not to increase taxes on people earning less than $400,000 annually. The Democrats are so hell-bent on raising taxes before a potential loss in 2022 that they seem to be ignoring many factors within their own base that could negatively impact their electoral chances, all for the sake of raising more money for government – money that won’t even come close to making up what will be spent by their own legislation.
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