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CBPP says Regressive Cigarette Taxes are Okay Because: The Benefit Principle

2 min readBy: Kyle Pomerleau

On March 19th, 2014, the Center on Budget and Policy Priorities released a paper praising President Obama’s plan to raise the federal cigarette excise taxAn excise tax is a tax imposed on a specific good or activity. Excise taxes are commonly levied on cigarettes, alcoholic beverages, soda, gasoline, insurance premiums, amusement activities, and betting, and typically make up a relatively small and volatile portion of state and local and, to a lesser extent, federal tax collections. in order to finance early childhood education.

The cigarette excise taxA tax is a mandatory payment or charge collected by local, state, and national governments from individuals or businesses to cover the costs of general government services, goods, and activities. is regarded as a regressive taxA regressive tax is one where the average tax burden decreases with income. Low-income taxpayers pay a disproportionate share of the tax burden, while middle- and high-income taxpayers shoulder a relatively small tax burden. because it targets smokers, a population that has lower levels of income on average than the U.S. population at large. From CBPP: “29 percent of poor adults smoke, compared to 18 percent of non-poor adults” and “expenditure for cigarettes account for a greater share of lower-income households’ budgets.”

Generally, CBPP is opposed to regressive taxes and favors the more progressive income tax. But this time, the regressivity of the cigarette tax doesn’t bother CBPP.

They say that a cigarette tax isn’t really that regressive because the population that pays the tax benefits the most from the tax through health benefits and increased funding for early childhood education. They are getting what they pay for.

In essence, the CBPP is endorsing the benefit principle: a principle that states that taxes people pay should reflect the benefits and the costs of services they receive.

I assume this means the CBPP will be more sympathetic to these statements now: