Obama's first tax increase: National sin tax is effective April 1
Posted by AccountingWEB in Tax, Income Tax on 04/01/2009 - 11:46
How did they vote?
See how your Senators and Representatives voted on the 2009 SCHIP legislation:
The first major tax increase from the president who promised no tax increases on 95 percent of the population goes into effect today, April 1. This is not an April Fool's Day joke - this is a tax increase that hits approximately 21 percent of adults age 18 and over, regardless of income level, and approximately 20 percent of teenagers, many of whom are not normally considered to be among the ranks of taxpaying citizens.
The federal tax, an increase of 62 cents per pack of cigarettes, starts April 1. Here's how this translates into actual numbers, using the assumption that the average smoker smokes one pack of cigarettes per day.
At one pack a day, the average smoker will pay an additional 62 cents per day, or $226.30 per year in additional tax. The smoker who smokes two packs per day will pay an additional $452.60 per year in tax. There are no deductions allowed that might lower this tax. There are no credits available for people who are on a fixed income or who are out of work.
The Americans for Tax Reform Web site mention the following statistics:
- 55 percent of smokers are considered to be "working poor."
- One in four smokers lives below the poverty line.
- On average, smokers, whose median income is a little more than $36,000, make about 30 percent less than non-smokers.
Using numbers from the 2000 census, there are approximately 218 million people age 18 and over in the United States. If 21 percent of those people smoke one pack of cigarettes per day, the federal government will collect an additional $10,360,014,000 per year.
There are approximately 17 million people age 14-17 in the United States. If 20 percent of those people smoke one pack of cigarettes per day, the federal government will collect an additional $769,420,000 per year.
That's a total of $11,129,434,000 per year of additional revenue for the federal government, gained in the form of a tax increase affecting approximately 21 percent of the adult population and 20 percent of the teenage population.
In addition, the new legislation imposes a 35.36 cent per cigar tax increase on large cigars and a 97 cent increase on packages of small cigars. Pipe tobacco will be taxed an additional $1.73 per pound of tobacco. Cigarette paper packages will see a tax increase of $1.93 per package. Additional tax increases will affect chewing tobacco, snuff, cigar wrappers, and cigarette tubes.
Congress created this tax to pay for the expansion of the State Children's Health Insurance Program (SCHIP), a program originally designed to provide aid to impoverished children. Using the revenue collected from smokers, SCHIP will now include children from families with up to three times the federal poverty level as well as children from high-income families in New York and New Jersey. The new tax also allows SCHIP to expand to provide dental benefits, coverage for mental illnesses, and coverage for immigrant children and immigrant pregnant women with no waiting period. President Bush vetoed this legislation twice when it came before him, claiming it would lead to "government-run health care for every American." President Obama signed the legislation in February claiming that "providing coverage to 11 million children is a down payment on my commitment to cover every single American."
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Gail Perry, CPA
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Tax Increase is a myth - I don't even know anyone who makes $250,000 or more
Since cigarettes are killing my husband and probably thousands of others I hope they are $15.00 per pack.
Tax everyone! (Except me)
I always find it amusing when people support tax increases for vices such as smoking. I do not smoke. I have never smoked. I do not support taxing cigarrettes over and above the same sales tax that applies to every other commerical good. Smoking is bad for you. So is soda pop. Do you also support a cola tax? Probably not... if you drink cola. If it does not affect you, you most likely don't care. THINK before you speak. There is nothing that limits the government to taxing cigarrettes under the premise that they are harmful. Many products on the market can be considered harmful. Google dihydrogen monoxide. Perhaps that will open your eyes.
Piety
The overly pious are with us always.
I remember back in the early 60's in Mississippi, we could deduct beer tax and cigarette tax, too bad we still can't. I always thought of that as a stimulus package.
tax on tea
To say this tax is not a tax, or that because it is a socially good thing are like saying that the English fee on tea was merely a social good. Wake up people! If the government takes money from the citizens it is a tax. This is newsworthy for any tax pro that needs to be informed about the affects of government money grabbing from his/her clients.
Please leave politics out of "news coverage"
To the editors, I am extremely disappointed in the "Top News" posted today 4/2/2009 and the headline on the the email bulletin sent today Suggesting that a $0.62 cent per pack "fee increase" is a "tax increase" and is a renege on a campaign pledge is a joke and straight out of the daily talking points of the RNC. While I have issues with certain steps taken by the administration, I also understand that by tax increases, they clearly were speaking of Income, Capital Gains, Estate Taxes, Payroll tax, etc. What the average person considers a tax is what gets withheld from their paycheck, or what they pay at the end of the year. There are fees and there are taxes. While I do not discount an individual's right to have any opinion or to call into question any fee increase or believe that it is a regressive hit to our populace, I question the motives of the article as political and not out of fiscal concern for the poor or our nation as a whole.
But most importantly, this is not 'news' worthy of an accounting-focused web portal. Please write news that is news, or mark it clearly as opinion. The cigarette tax has zero impact on the preparation of financial reports, financial planning or real income taxes which is what accountants work on (unless you work for Phillip Morris) and please spare the crocodile tears your writer is shedding for the lower income smokers. This is a brazen attempt to create a false controversy, to call "Opinion" "News", which is inspired by the Foxification of news.
Was this truly the largest news story of the day for accountants and deserving of a such a caustic headline? I might have thought the relaxation of mark to market accounting rules, 157-e, FASB rules, might actually be more important news of use to the accounting community you serve.
No-brainer
We have known smoking is addictive and puts people at health risks for almost 50 years now. Anyone who takes this up, or continues to smoke, deserves to be taxed. Up the tax high enough and folks will quit or starve. Not a problem. This isn't a tax hike, it is a move toward greater education.
Tax all you want !
This is really no tax hike if you ask me. Taxing smokers helps everyone. The smokers smoke less. The money goes to kids and other deserving group. I don't see why it is an issue.