What's Happening in the Federal Government
On March 4, 2014, President Obama released his 2015 federal budget proposal, which would significantly increase the federal excise tax on a pack of cigarettes by 94¢ to $1.95 per pack—roughly a 93% increase—nearly doubling what adult consumers would pay in federal taxes alone on cigarettes! It would also increase federal excise taxes on other tobacco products by a similar percentage.
Here's what the trend in federal cigarette excise tax increases looks like:
- In 2000, the federal excise tax on cigarettes went from 24¢ to 34¢/pack ($3.40 a carton).
- In 2002, the federal excise tax on cigarettes went from 34¢ to 39¢ per pack ($3.90 per carton).
- In 2009, only four years ago, when the tax stood at 39¢/pack, the largest federal tobacco tax increase in history raised it to $1.01/pack (more than $10 a carton!).
- Now, if the President's budget proposal passes, that number would skyrocket to $1.95/pack (almost $20 a carton!).After 2014, the tax rate would increase again each year automatically in an amount indexed to the inflation rate.
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If Congress gives the President what he wants, federal excise taxes on cigarettes will have increased almost ten-fold in just over a decade, going from 24¢/pack in early 2000 to the nearly $2.00/pack this year. And that’s on top of over 120 state cigarette tax increases we have seen since 2001.
The average price of a pack of cigarettes in the U.S. is now $6.19, of which nearly 55% ($3.34) is government taxes and fees. The President's proposed tax increase will dramatically impact those costs. If the 94¢/pack increase passes, the government’s share will increase to more than 60% ($4.28) of the sale price.
We all know how these kinds of tax increases affect not only adult consumers but retailers and other local businesses as well.
This op-ed by Lyle Beckwith, Senior Vice President of the National Association of Convenience Stores, also highlights how these kinds of tax increases actually benefit the black market, which may have negative impacts on efforts to prevent underage tobacco use, and can harm on tobacco retailers.
Tobacco Issues will keep you updated on the progress of the President's proposed tax increase and let you know what retailers can do to help fight it.
Sign our petition to say Enough is Enough and help us stop this massive and unfair tax hike on tobacco products!
Information provided by Altria Client Services Inc. on behalf of Philip Morris USA, U.S. Smokeless Tobacco Co.,
John Middleton and Nu Mark LLC