On the campaign trail in 2020, President Joe Biden told CBS’s Norah O’Donnell, “Nobody making less than $400,000 will pay a penny more in tax under my proposal.” Then, for good measure, he added, “That’s a guarantee. A promise. I give you my word as a Biden.” This wasn’t a gaffe or a one-off. Biden repeated his promise not to raise taxes on those earning below $400,000 no fewer than 60 times. There were no caveats or additions.
But legislation recently released by the House the Ways and Means committee flies in the face of Biden’s cast-iron guarantee with an eye-watering increase to the federal tobacco tax. Cigarette taxes would double to more than $2 per pack under the House proposal. In addition, all other nicotine products, regardless of whether the Food and Drug Administration has approved them as “appropriate for the protection of public health,” would be taxed at the same rate as cigarettes.
So far, the White House has refused to commit to the legislation.
Around 34 million Americans currently smoke, and three-quarters of smokers are from low-income communities. Smokers are significantly less likely to have a college degree and more likely to work a blue-collar job. The smoking rate in the LGBTQ community is 20 percent, compared to the national average of 14 percent. And there’s no question that a hike in the tobacco tax would be regressive, with almost all smokers making less than $400,000 per year.
For some, the regressivity of cigarette taxes is their biggest selling point. Speaking about so-called sin taxes in 2018, former New York City Mayor Michael Bloomberg said, “Some people say, well, taxes are regressive. But in this case, yes they are. That’s the good thing about them because the problem is in people that don’t have a lot of money.”
There is no doubt high cigarette taxes can reduce some cigarette consumption, as proponents of the taxes hope. But even high taxes don’t push most smokers to quit. Thus, even under the most optimistic scenarios about how many smokers would quit smoking in response to the tax increase, millions of low-income Americans would pay higher taxes if the proposed legislation goes into effect.
The constituents of Sen. Joe Manchin (D-WV) would be particularly hard hit by the tax. So, like so many other Democratic priorities in Congress right now, the fate of the House bill could ultimately rest in Manchin’s hands if it reaches the Senate. The poverty rate in Manchin’s state of West Virginia is above the national average at 16 percent. There are 15 states with lower cigarette taxes than West Virginia, yet it still has the highest smoking rate in the nation. The proposed federal cigarette tax would see a pack-a-day smoker in West Virginia pay almost $400 more in taxes a year, for a total of $1,593 per year. That’s 10.6 percent of the annual income of a low-income smoker making $15,000 a year.
Some may be tempted to cheer for the tax increase if, in the end, it prevents more deaths from smoking. But what’s especially disturbing about the new proposal is that it would also tax safer alternatives to traditional cigarettes, like e-cigarettes and heated tobacco products, at the same rate as cigarettes. For example, the federal tax on a pack of 5 percent nicotine Juul pods would be $9.18.
Extensive research shows e-cigarettes are dramatically safer substitutes for traditional cigarettes and effective in helping smokers quit. According to researchers at the City University of New York and Bentley University, taxing e-cigarettes at the same rate as cigarettes would deter 2.75 million people from quitting smoking. E-cigarettes are currently under review by the Food and Drug Administration and some could soon be approved as “appropriate for the protection of public health.”
The FDA has already approved two tobacco products as being net beneficial for public health because they are less toxic than cigarettes and a pathway out of smoking. But the tax proposal from the House Ways and Means would treat these products the same as combustible cigarettes. The policy turns the logic of sin taxes on its head by penalizing consumers who are consuming a less dangerous product.
Hiking cigarette taxes on an unpopular minority may be welcome among a large group of taxpayers—the wealthier, college-educated, non-smoking, non-vaping part of the electorate. Still, the proposed cigarette tax increase is almost uniquely targeted at some of the very people Democrats in Congress said they would protect from tax increases.