WASHINGTON -- The National Association of Tobacco Outlets (NATO) has issued new letters to Congress concerning the increase in the federal cigarette tax from 39 cents a pack to $1 a pack and the raising of the federal excise tax on other tobacco products, including cigars, pipe tobacco and smokeless tobacco, by 156%.
Earlier this month, the Finance Committee approved a bipartisan plan to renew and improve the State Children's Health Insurance Program (S-CHIP), to be funded with the tobacco tax hikes. The program provides health coverage to low-income, [image-nocss] uninsured American children whose parents do not qualify for Medicaid.
The letters focus on the proposed tax rates from a percent increase point of view. Current federal law taxes a large cigar at a rate of 20.719% of the manufacturer's price with a maximum tax or cap of 4.875 cents per cigar, it said. The Senate S-CHIP reauthorization plan would increase the rate on large cigars to 53.13% of the manufacturer's price and raise the cap to $10 per cigar. By raising the cap to $10, the maximum tax on a cigar would be 20,000% higher than the current tax on a cigar. This 20,000% percent increase in the cigar tax would equate to the federal excise tax on a 12-oz. can of beer increasing from the existing 5 cents a can to $10 per can or $60 on a six pack.
In terms of cigarettes, the proposed tax would increase by 61 cents pack from the current 39 cents per pack to $1 per pack, a 156% increase. Likewise, the tax rates on pipe tobacco, snuff, chewing tobacco and cigarette papers and tubes will rise by 156% while the tax rate on little cigars will increase by 2,400% and the excise tax on roll-your-own tobacco will rise by 713%. The magnitude of these tax rate increases is unconscionable and has sparked outrage among citizens and retailers alike. In the history of the United States, has there ever been such an enormous tax increase on a single product? NATO asked in its letters to Congress.
These staggering percentage increases in all tobacco products are the subject of new NATO letters being faxed to all 100 U.S. Senators and the 93 U.S. Representatives that are members of either the House Ways & Means Committee or the House Energy & Commerce Committee, said Thomas Briant, executive director of NATO, in the group's latest email newsletter.
These two House committees are considering legislation to reauthorize the S-CHIP program.
The newsletter also said, Former U.S. Supreme Justice John Marshall's quote 'The power to tax is the power to destroy' is an exact characterization of the consequences that the tobacco industry will suffer if the U.S. Senate and U.S. House enact the enormous tax increases on all tobacco products to expand the funding of the [S-CHIP].
The group said it does not oppose the reauthorization of the S-CHIP program. Rather, our concern lies with the overzealous tax increases being proposed on tobacco products to fund the S-CHIP program, it said in the congressional letters.
NATO is also fighting a bill in Illinois that would increase the state cigarette tax by 75 cents per pack to $1.73 per pack (see related story in this issue of CSP Daily News). NATO alerts have been sent to all members in Illinois and NATO has sent a press release opposing the tax increase to more than 200 newspapers, TV stations and radio stations in the state. Currently, there is no OTP tax increase or any floor stocks tax in the bill.
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