The Morning Jolt

Economy & Business

Joe Biden’s Great Big Tobacco-Tax Hike

President Joe Biden campaigns for Democratic candidate for governor of Virginia Terry McAuliffe at a rally in Arlington, Va., October 26, 2021. (Jonathan Ernst/Reuters)

On the menu today: President Biden is about to break his oft-repeated promise to never raise taxes on anyone making less than $400,000 per year by doubling the taxes on cigarettes and hiking taxes steeply on all other tobacco products; the Pentagon warns that ISIS-K in Afghanistan could have the capability to attack the United States in as little as six months, and that it has the intention to do so; and noting that “shutting down the virus,” as the president pledged, requires the most anxiety-ridden Americans to accept that the pandemic ending.

A Tax on the Poor

“Nobody making under 400,000 bucks would have their taxes raised, period, bingo.” — Joe Biden, interview on CNBC’s Squawk Box, May 22, 2020.

“Under my plan, if you make less than $400,000, you won’t pay a single penny more in taxes. You have my word on it.” — Joe Biden, November 2, 2020.

“I give you my word as a Biden: If you make under $400,000 a year, I’ll never raise your taxes one cent.” — President Biden, September 26, 2021.

You notice that when Biden makes this promise, he does not specify federal income taxes. He does not carve out exceptions or offer any qualifications or conditions. In fact he emphasizes how there are no exceptions — “period, bingo,” and so on.

Except, the current version of the “Build Back Better” proposal includes a slew of steep tax increases on tobacco products, including:

. . . doubling rates on cigarettes and increasing rates on all other tobacco and nicotine products to achieve parity with the new rate on cigarettes. The rate on chewing tobacco increases more than 2,000 percent, and the rates on pipe tobacco and snuff over 1,600 percent each. Vapor products, which have not been taxed at the federal level thus far, would be taxed at a rate of $100.66 per 1,810 mg of nicotine. That equals a federal tax on a regular pod-based product of roughly $2.25 per pod — more than the new federal $2.01 rate on a pack of cigarettes).

You may like or use tobacco products, or you may not; that’s not really the issue here — although keep in mind that the existing federal taxes on tobacco products are already considerable: “The federal excise tax on cigarettes is just over $1.00 per pack. Large cigars are taxed at 52.75 percent of the manufacturer’s sales price, with a maximum tax of 40.26 cents per cigar. Pipe and roll-your-own tobacco are taxed at $2.83 and $24.78 per pound, respectively.”

Even if you hate all tobacco products, hate all tobacco users, and want to raise taxes on tobacco products through the roof, there is no getting around the fact that this is a blatant, glaring, flashing-neon-sign violation of Biden’s oft-repeated no tax increase pledge. Tobacco users who make less than $400,000 per year are not exempted from the tax increase.

The fiscally conservative Tax Foundation notes that, “As a source of general fund revenue, the tax is exceedingly regressive. The vast majority of smokers have lower incomes, and tobacco is one of the few goods that have an inverse relationship with income in that consumption increases as income decreases.”

If you don’t like the Tax Foundation’s analysis, turn to the progressive Institute on Taxation and Economic Policy. Its data show that hiking tobacco taxes does not affect the top 20 percent of incomes in the U.S. in any measurable or significant way, but it would hit the poorest 20 percent of Americans more than any other demographic, increasing their taxes by four-tenths of one percentage point. “Unlike the personal and corporate income tax provisions discussed above, tax increases on tobacco and nicotine would clearly fall most heavily on low-income smokers,” the ITEP reports.

But those studies don’t give the full picture of which Americans would be paying the most if the federal government chose to double taxes on cigarettes.

According to the CDC, an estimated 34.1 million adults in the United States currently smoke cigarettes — about 15 out of every 100 men and 13 out of every 100 women. Rates of cigarette smoking are inversely connected to education level: About 35 percent of adults with a GED certificate; about 22 percent of adults with some high-school education but no degree; nearly 20 percent of adults with a high-school diploma; nearly 18 of every 100 adults with some college but no degree; nearly 7 percent of adults with an undergraduate degree; and just 4 percent of all adults smoke cigarettes.

It will probably not surprise you that the poorest Americans smoke the most cigarettes. About 21 percent of adults with an annual household income under $35,000 smoke cigarettes; about 16 percent of adults with an annual household income of $35,000 to $74,999 smoke cigarettes; about 11 percent of adults with an annual household income of $75,000 to $99,999 smoke cigarettes; and just 7 percent of adults with an annual household income above $100,000 smoke cigarettes.

It may surprise you to learn that 19 percent of lesbian/gay/bisexual adults smoke cigarettes, and only about 14 percent of heterosexual/straight adults do. Among ethnic groups Native American/Alaskan natives have the highest rate of cigarette smoking at nearly 21 percent, compared to 16 percent of whites, 15 percent of blacks, 9 percent of Hispanics, and 7 percent of Asians.

Nearly 25 percent of all adults on Medicaid smoke cigarettes, as do nearly 23 percent of uninsured adults. A little under 18 percent of adults on other public insurance smoke cigarettes, while just 11 percent of adults with private insurance do. The demographic least likely to smoke cigarettes is adults on Medicare, at less than 9 percent.

Doubling the cigarette tax is a tax that disproportionately effects the least educated and poorest Americans and will also disproportionately hit gays and lesbians, those on Medicaid, and the uninsured. A bit more than 21 percent of Americans classified as disabled smoke cigarettes, while 13 percent of those without disabilities do.

If this tax hike is enacted, it is extremely easy to envision Republican congressional challengers running attack ads against Democrats next year, accusing them of having hiked taxes on the poorest Americans. And the ads will be true! “Congressman Jones voted to double taxes on the poorest Americans, the disabled, those on Medicaid, and the uninsured” is going to do a lot to fire up Republicans and depress Democratic grassroots turnout.

You can already see some Democrats in some not-so-blue states recognizing the consequences of this proposal, such as Kentucky governor Andy Beshear:

Beshear’s letter to Biden, obtained by The Courier Journal, was dated last Wednesday and expressed his “concern” that the proposed tobacco tax hikes “will harm Kentucky farmers and businesses almost exclusively.”

“Based on information I have seen, Kentucky tobacco farmers and businesses stand to forfeit an estimated $51 million in lost revenue under the proposal,” Beshear wrote. “The total estimated negative economic impact in the commonwealth could reach as high as $65 million, including 295 fewer jobs, $11. 6 million in lost wages and $28.8 million less in state and local revenue.”

The governor added the tax hike also “unfairly targets producers of dark-fired tobacco in Kentucky — one of only two places in the world where it is made — putting at risk hundreds of well-paying union jobs in our communities.”

“Kentucky’s agricultural sector will bear a costly and outsized burden under the current tobacco excise tax proposal in Congress. A disruption of this magnitude could create a harmful ripple effect throughout the agricultural supply chain, and devastate an industry already hit hard over the years.”

On top of all that, enacting this tax hike would reinforce the fact that Joe Biden is a big fat liar. If Biden had spent the past few years emphasizing that, “Nobody making under 400,000 bucks would have their taxes raised, unless they use tobacco products,” this would be a different story. But he didn’t. Biden wanted to pose as the kind of leader who would only raise taxes on rich people, and he’s hoping no one notices the tobacco-tax hikes.

Heading into 2022, Republicans will be able to point to an embarrassing litany of broken Biden promises — his promise to not hold children in detention centers, his promise to send out $2,000 stimulus checks, his promise to establish a national commission on policing, his promise to punish Crown Prince Mohammed bin Salman of Saudi Arabia, his promise to end the use of standardized testing in schools, his campaign-trail promise to cure cancer, and, of course, “If there’s American citizens left, we’re gonna stay to get them all out.”

Speaking of Afghanistan. . . .

After Biden Said the Threat Was Gone, the Terrorist Threat Is Back in Afghanistan

President Biden, August 31: “Let me be clear: Leaving August the 31st is not due to an arbitrary deadline; it was designed to save American lives. . . . This is a new world. The terror threat has metastasized across the world, well beyond Afghanistan.”

Reuters, yesterday:

The U.S. intelligence community has assessed that Islamic State in Afghanistan could have the capability to attack the United States in as little as six months, and has the intention to do so, a senior Pentagon official told Congress on Tuesday.

The remarks by Colin Kahl, undersecretary of defense for policy, are the latest reminder that Afghanistan could still pose serious national security concerns for the United States even after it ended its two-decade-old war in defeat in August.

If only someone had warned the president. . . .

The Only Thing Holding Back America Is Americans

Even as the numbers of new COVID-19 cases, hospitalizations, and deaths decline, public confidence in President Biden’s ability to rescue the economy from the effects of the pandemic has dropped since January.

A lot of that reflects inflation and the headaches and shortages stemming from the supply-chain crisis, but I wonder how much that declining faith reflects the fact that those who are relatively sanguine about the pandemic and ready to go back to normal often live alongside and encounter people who are still at Defcon One over COVID – such as this example of a parent freaking out over her eleven-year-old daughter coming within six feet of a friend. As of this morning, 96.5 percent of seniors have at least one dose of a COVID vaccine, almost 80 percent of adults have at least one dose of a COVID vaccine, 77.7 percent of all eligible Americans have at least one dose of a COVID vaccine, and a COVID vaccine for kids is about to roll out. When can we go back to normal? What more do the anxiety-ridden need to see?

In Montgomery County, Md., 99.9 percent of residents ages twelve and up have received at least one dose of a COVID vaccine. Masks are still required for everyone two years and older in every public building, and “a county library official told us this week that story times and other indoor programs would not resume until vaccines are approved and available for children. Meanwhile, teen programming remains virtual, despite almost every single teen in the county having at least one vaccine dose.”

Biden’s pledge to “shut down the virus” requires Americans to buy into the notion that the virus is shut down.

ADDENDUM: In case you missed it yesterday, Facebook is experiencing a media gang-tackle the likes of which we have rarely seen. Spending a lot of time on social media may well have some unhealthy consequences. But it’s hard to believe that Facebook is some sort of unique societal menace, while Twitter, Instagram, YouTube, and the rest are just fine and dandy.

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