Michigan has been tangled up in a transportation funding back-and-forth for the last year or so. The most recent episode was a May ballot initiative to raise sales and gas taxes that failed 80-20. As of yesterday, news...
- The Tax Policy Blog
- Today's Federal Tobacco Tax Hike Will Drain State Co...
Today's Federal Tobacco Tax Hike Will Drain State Coffers
The Wall Street Journal published an op-ed this morning by economist Brad Shiller on the new federal tobacco tax hike. Shiller claims that with this tax hike, a 62-cent hike per pack that took effect today, Obama broke his campaign promise not to raise taxes on low-income people.
It's true that most smokers earn little. In fact, no popular consumer product has such a low-income customer base as tobacco.
The Obama administration might reply that his no-new-tax promise to the poor and middle class was only about income taxes, and that the president has already signed a temporary, two-year tax cut for low- and middle-income workers, the so-called Making Work Pay credit of $400 per worker. A smoker might retort that $400 doesn't cover the tobacco taxes he's paying now: $1.01 per pack to the federal government and an average of $1.18 per pack plus sales tax to state government.
Shiller goes on to quote Tax Foundation chief economist Patrick Fleenor's new Fiscal Fact on how much state governments will lose in tax revenue when the federal government horns in on tobacco tax revenue like this. Here's the Fiscal Fact which estimates the revenue losses by source and by state.
Get Email Updates from the Tax Foundation
We will never sell or share your information with third parties.
Join the Tax Foundation's fight for sound tax policy Go
About the Tax Policy Blog
The Tax Policy Blog is the official blog of the Tax Foundation, a non-partisan, non-profit research organization that has monitored tax policy at the federal, state and local levels since 1937. Our economists welcome your feedback. If you would like to send an e-mail to the author of a blog post, please click on that person's name to locate his or her e-mail address or visit our staff page here.