July 13, 2007
For more information, contact: Nate Bailey at (202) 464-5102.
Washington, DC, July 13, 2007 - Rising even faster than property taxes, cigarette taxes are harder on the poor than any federal tax, according to two new publications about the Congress's current effort to raise the federal cigarette tax.
The studies are in the Tax Foundation Fiscal Fact series, Nos. 92 and 93: "State Tobacco Tax Rates Have Skyrocketed Since Last Federal Tax Increase," by Curtis Dubay and Gerald Prante, and "Options for Funding SCHIP Expansion: Cigarette Taxes Least Defensible Alternative," by Gerald Prante.
Because the Senate is currently planning to raise $35 billion more in tax revenue, Prante compares that tax source to six other federal taxes. All the others are much easier on the poor.
"The burden of the proposed cigarette tax hike on the lowest-earning 20 percent of households is 37 times heavier than it would be if the government raised the money with the federal income tax," asserts Prante. "Put another way, the proposed cigarette tax hike will hit the poor with the same force as cutting the Earned Income Tax Credit (EITC) by one quarter."
Dubay debunks the argument advanced by some that the tobacco tax has lain dormant for so long that it is overdue for a raise.
"The federal cigarette tax has stayed at 39 cents for five years, but 36 states have increased cigarette taxes since 2002," explains Dubay.
That tax-raising trend has not slowed in 2007: five states having already enacted higher cigarette taxes this year.
"Cigarette taxes have risen at more than twice the rate of inflation since 2002," says Dubay.
See Fiscal Fact No. 92 at http://www.taxfoundation.org/publications/show/22476.html
See Fiscal Fact No. 93 at http://www.taxfoundation.org/publications/show/22477.html
The nonpartisan, nonprofit Tax Foundation has monitored tax policy at the federal, state and local levels since 1937. Best known for its annual calculation of Tax Freedom Day®, the Tax Foundation is a nonprofit, nonpartisan 501(c)(3) organization.
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