Taxes – The Little Black Book of Billionaire Secrets
OCT 30, 2015
Billionaires Who Want To Tax Poor People
Opinions expressed by Forbes Contributors are their own.
David Brunori, CONTRIBUTOR
Have you ever noticed that rich people sometimes spend their time trying to make life harder for poor folks? Billionaire investment mogul Thomas Steyer is one of them. As a billionaire, he is, well, really rich. In the past, he has funded efforts to impose regressive taxes on energy. Now he is funding an attempt to significantly increase California’s cigarette tax (from 87 cents per pack to $2 per pack). An initiative filed by Save Lives California will likely be on the 2016 ballot with Steyer’s help. Besides the big tax increase, the initiative will impose an equivalent tax on electronic cigarettes.
In this photo taken Thursday, Aug. 20, 2015, billionaire Tom Steyer talks with reporters in Sacramento, Calif. Steyer, on Wednesday, announced joining an effort to raise California’s cigarette tax by $2 per pack through a ballot initiative. (AP Photo/Rich Pedroncelli)
Save Lives California is a coalition of people who (1) sincerely care about health issues (for example, the American Lung Association); (2) live for no other reason than to run other people’s lives (Steyer); and (3) want money (public sector unions). The coalition says it will raise an additional $1.5 billion a year. The money will be used for a variety of reasons. But let’s be clear: Steyer says his goal is to get people to quit smoking. I won’t defend smoking, but I find it offensive that someone would use the tax laws to impose their belief system on others. Actually, I find it offensive when anyone tries to impose their belief system on anyone else.
The tax laws are supposed to be used to raise revenue to pay for services sought by the public. They should not be used for any other reason. Specifically, they should not be used as an incentive or punishment. There are many ways to lord it over people besides taxing them. Indeed, the regulatory system has done far more to curb smoking than taxes. In most of America, you cannot smoke in public places like restaurants, bars, offices, etc.
To the extent that excise taxes are justified, they should be used to pay for externalities. And this initiative will purportedly do that. But that is not the goal of Steyer or the coalition. They want prohibition through the tax laws. The public service unions don’t care about externalities. They care about money. The right thing to do is to determine the public costs of smoking in California and set the tax accordingly. The state may in fact require more cigarette tax revenue to pay for those costs; it may not.
But even if you aren’t offended by some billionaire’s desire to tell you how to live, think about the two things that are very wrong with this initiative. First, all excise taxes, particularly those on tobacco, are regressive. Poor people will pay more. It is hypocritical to proclaim that you care about the poor and dispossessed and then back decidedly regressive taxes.
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Four U.S. Senators Propose Tobacco Tax Changes
February 12, 2015
By Patrick Lagreid
Four U.S Senators, led by Sen. Dick Durbin (D-IL) have introduced a piece of legislation that seeks to close loopholes in the tax code that have been exploited by the tobacco industry to avoid regulation and paying taxes for their products.
S. 450, known as the Tobacco Tax Equity Act, was introduced yesterday and referred to the Senate Committee on Finance. Sen. Durbin was joined by Senators Richard Blumenthal (D-CT), Jack Reed (D-RI), and Sherrod Brown (D-OH) in introducing the bill. While the full text of the bill has yet to be published, a press release issued by Sen. Durbin’s office said that the legislation would establish tax parity across all tobacco products, including new products determined to be a tobacco product by the U.S. Food and Drug Administration (FDA), like e-cigarettes. By establishing tax parity for tobacco products, it will eliminate loopholes that tobacco companies use to avoid the federal cigarette, small cigar, and roll-your-own (RYO) tobacco taxes, generating federal revenue and reducing use of tobacco products.
The tax parity would be created by establishing the tax rate on all tobacco products at the same per unit level as cigarettes, which is currently $1.01 per pack. While small cigars and RYO products are taxed at the same rate as cigarettes, cigars, smokeless tobacco, and pipe tobacco are taxed at lower and different rates. Because of this, some businesses rebrand their products to get them classified into a lower-tax category. For instance, RYO tobacco, which is taxed at $1.55 per ounce, is often labeled as pipe tobacco, which is taxed at 17.7 cents per ounce, and then those businesses rent time on cigarette making machines.
Sen. Durbin’s office cited a recent report by the General Accountability Office found that pipe tobacco sales increased over 1200% in September 2011 compared to January 2009, while RYO sales dropped 84%. A recent CDC study estimates that between August 2009 and August 2011, the sales of RYO as pipe tobacco resulted in over $1.3 billion in lost state and Federal revenue.
Premium cigars are taxed at 52.75% of the manufacturer’s price, with a cap of 40.26 cents per cigar. Chewing tobacco is taxed at 3.1 cents per ounce, while snuff is taxed at 9.4 cents per ounce.
The Cigar Association of America has already advised its constituents that the bill would have dire consequences for the cigar industry, since taxes would be drastically increased on cigars and pipe tobacco. Should it pass, the legislation would apply to any product determined to be a tobacco product by the U.S. Food and Drug Administration (FDA).
