Opinion Editorial | |
| Monday, June 1, 1998 | |
The Most Regressive Tax in History |
Although liberals claim to represent the poor, they are in the process
of ramming through one of the biggest tax increases of all time on those
very people. According to new data from Congress's Joint Committee on Taxation
(JCT), the Senate Commerce Committee tobacco bill, which would raise the
price of cigarettes by $1.10 per pack, will increase the federal tax burden
on those earning less than $10,000 per year by a whopping 44.6 percent by
the year 2003 (see figure). Sixty-one percent of all the new taxes will
be paid by those with incomes under $40,000. Meanwhile, those earning more
than $75,000 will see a tax increase of less than 1 percent. This must surely make this legislation the most regressive tax increase
in American history. Yet there has been nothing but silence from those
groups that are ordinarily so quick to attack any tax proposal that is not
tilted heavily in favor of the poor. Where are Citizens for Tax Justice
and the Center on Budget and Policy Priorities now? The hypocrisy is deafening. Furthermore, the largest impact of the higher cigarette taxes will fall
on racial minorities and those with little education, because they smoke
in higher percentages. According to a new report from the Surgeon General,
a higher percentage of blacks than whites smoke, and among both groups those
with less than a high school education are twice as likely to smoke as those
with a college education. What is worse is that the JCT figures are very conservative. The actual
impact could be far worse, because the ultimate effect of the Commerce bill
may be to raise cigarette prices by almost $3.00 per pack. According to
financial analyst Gary Black of Sanford C. Bernstein & Co., the widely-cited
$1.10 figure does not include all the provisions of the legislation. When
one adds to it the likely impact of look-back penalties, liability costs,
licensing fees and declining sales, the $1.10 figure rises to $2.78 per
pack. Similar calculations have been made by other Wall Street analysts
as well. If this estimate is correct, it could dramatically change the political
prospects for passage of the tobacco bill. According to a new poll by the
Tarrance Group and KRC Research, a substantial majority of Americans oppose
the tobacco bill if it raises cigarette prices by as much as $2.50 per pack.
The poll also indicates that Americans are very concerned about the impact
of higher cigarette taxes on creating a black market for cigarettes, reducing
jobs and creating new government bureaucracies. This suggests that the
tobacco bill may not be the political winner liberals have assumed. Source: Bruce Bartlett (senior fellow, National Center for Policy Analysis),
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