With cigarette excise taxes $2.51 per pack and $562 million taken in as tax revenue, plus $315 million from the tobacco settlement, you would figure that half of that money goes to smoking cessation programs, right?
Wrongo. According to WBZ's David Wade, out of nearly $900 million, only one half of one percent - $4.5 million - is earmarked for programs that help people quit smoking.
The other $895.5 million heads right to the General Fund. You buy a $7.50 pack of cigs in a poor section of Boston, you buy a firehouse for a well-to-do tony village in the Berkshires. Your dirt-cheap $5.75 pack of below-generic cigs purchased in Springfield may show up as a perdiem for a representative in North Andover, a dedication for a library of a state senator in Taunton, or even a re-election campaign push for the governor. Redistribution and super-easy cash at its best.
Put another way - if the state ever banned cigarettes, the tax revenues from cigarettes at both the state and federal level (which was raised to $1.01 in 2009) would mean billions of dollars lost per year. Now we know why the state will never ban cigarettes, at least until the federal government determines that all cigarettes are a health hazard and must be pulled off the shelves immediately. Once the Federal government is willing to give up their money habit, the state will be forced to follow suit.
Russet Morrow Breslau, head of Tobacco Free Mass, makes this astute judgement: ""You can't balance the budget on the backs of smokers[.]"
Who are those smokers, who are shelling out an effective tax rate of 45-60% to the general fund? The poor and middle class.
Showing posts with label cigarettes. Show all posts
Showing posts with label cigarettes. Show all posts
5/21/2010
4/06/2009
Some ideas on tobacco
I am a non-smoker. I have smoked maybe once or twice, but never took up the habit. My mother is an 18-year non-smoker, quitting in 1991. My brother quit in 2000. I do not have a problem with smokers, however - if they choose to take up the habit, I'm not going to stop them.
I have always stood by the notion that the taxation system we have in our country is circular. The government slaps taxes on the rich, and the government gives money to the poor. The poor think they're on easy street - until they have to fork over fees, taxes and other items, making them even poorer. And of course, all these taxes fliter right back to the government.
I think the state has just as much of an addiction to sin taxes as smokers do to cigarettes. I would bet most of that tax money doesn't quite make it to children's health care, or smoking cessation programs, or the like. Rather, it makes up for budget shortfalls and pork - so even though the thin veil is "for the children," it's really "for the government who can't control their spending and rely on the people to fund their shortfalls." The Carrie Nations of tobacco - the finger waving nags and lobby-funded nannies who seem to have no problem with being "control freaks" - until the revenue dries up when smokers finally quit or the state bans tobacco entirely. Then they need a huge nicotine-style patch to get over their money cravings.
I offer four ideas that may or may not assist in the fight between government and smokers.
1. Rather than banning cigarettes outright, put them under state monopoly - liquor and lottery tickets too.
Taking tobacco products off the shelves of convenience stores and liquor stores in a Carrie Nation-style fervor shifts the tobacco sales underground. Taking them off the shelves and making the state responsible for pricing and distributing these items is a much better alternative, as it puts the full onus of monitoring and sales on the Commonwealth, not on mom-and-pop stores. If it includes State Police monitoring IDs, all the better, as mom-and-pop stores shell out punitive fines for catching underage smokers.
In fact, tobacco and liquor should be put under state monopoly. If the state of New Hampshire can be successful in having State Liquor Stores, so can the Commonwealth. Let the convenience and liquor store lobby seethe - many have done a lax job in monitoring anyway and have the fines and multiple-day sales prohibitions to show for it. The Commonwealth will no longer have to shell out commissions or fees, and can be in direct competition with New Hampshire. It will also force the Commonwealth to defend itself against critics - "If smoking is so dangerous, why is the state being a enabler? Must be for the taxes, correct?"
2. Illustrate the total price -including wholesale, distribution and marketing fees, federal, state, and sales taxes - for a pack of cigarettes.
People are already angry that their cigarettes are pushing $9 a pack. $3.52 of that is federal and state tax, plus an additional 20-40 cents in sales tax. On the really cheap cigarettes - which last year were $4 and now are $6 - the wholesale prices really shock the dickens out of smokers, i.e. "They buy for this cheap and they sell it for this outrageous price?"
E.g. $4.00 wholesale per pack of premium cigarettes + $1.01 federal tax + $2.51 state tax + $0.38 sales tax = $7.91 per pack. Total tax take based on price - 50%.
E.g. $2.50 wholesale per pack of budget cigarettes + $1.01 federal tax + $2.51 state tax + $0.30 sales tax = $6.33 per pack. Total tax take based on price - 61%.
These taxes are far higher and easier to collect than the income tax of 35% - and everyone pays it. They are definitely regressive - meaning the poor, who pay little or no income taxes, will see themselves forking over almost 61% in tobacco taxes instead - hence the circular function of taxation in our country, from rich to the government in taxes, the government to the poor in entitlements, and then the poor back to the government in sin taxes and fees.
Another interesting thing to consider: when minimum wages in the 1970s were $1.25 per hour, a pack of cigarettes cost around 40 cents, so a MW earner could buy about 2 packs of cigarettes. Today, the state mimimum wage is $7.50, and now a pack of cigarettes costs $8 and effectively prices a MW worker out of a pack of cigarettes by 50 cents, yet it also removes one potential revenue source. The government loses out on tax revenue when a MW worker cannot afford to buy the premium cigarettes at $8 a pack.
3. For those who wish to quit, the lure of free money is always the best incentive.
The Commonwealth should institute a program that encourages people to quit. Take a sliver of all that tax money collected from smokers and offer them a deal - go into a smoking cessation program (with patches, chewing gum, pills and the like) and if they successfully complete a six month program, you can take $2,500 off your taxes. After that, all that money in taxes you spent on cigarettes is yours to keep and save - and invest wisely.
4. For once and for all, investigate the effects of tobacco, free of politics and lobbyists - and then release the results to the public and take appropriate action.
If independent research - free from lobby groups, rigged numbers that trill of the tip of the tongue, and others - determine that tobacco is indeed dangerous and has caused deaths and health problems, then the people and the Commonwealth can come to an agreement on what the next step is. If a ban is appropriate, then so be it. If putting gross pictures of cancer victims will be an effective deterrent, even better.
Aside (in honor of Kate Jackson at Pointy Universe): When I watch those ads on TV with the young college kids demonstrating all the icky things that happen when you smoke, or all that statistical mumbo-jumbo, I think to myself, "What do they do afterwards? I know...they pull out a big fat joint and take a hefty drag on it." (Yes, Kate - this proves I do read your blog!)
But giving the responsibility of research to the tobacco or anti-tobacco lobby invites trouble, as the statistics can be skewed one way or the other to their favor.
Not all of you will agree with my proposals. They are ideas worth considering, however.
I have always stood by the notion that the taxation system we have in our country is circular. The government slaps taxes on the rich, and the government gives money to the poor. The poor think they're on easy street - until they have to fork over fees, taxes and other items, making them even poorer. And of course, all these taxes fliter right back to the government.
I think the state has just as much of an addiction to sin taxes as smokers do to cigarettes. I would bet most of that tax money doesn't quite make it to children's health care, or smoking cessation programs, or the like. Rather, it makes up for budget shortfalls and pork - so even though the thin veil is "for the children," it's really "for the government who can't control their spending and rely on the people to fund their shortfalls." The Carrie Nations of tobacco - the finger waving nags and lobby-funded nannies who seem to have no problem with being "control freaks" - until the revenue dries up when smokers finally quit or the state bans tobacco entirely. Then they need a huge nicotine-style patch to get over their money cravings.
I offer four ideas that may or may not assist in the fight between government and smokers.
1. Rather than banning cigarettes outright, put them under state monopoly - liquor and lottery tickets too.
Taking tobacco products off the shelves of convenience stores and liquor stores in a Carrie Nation-style fervor shifts the tobacco sales underground. Taking them off the shelves and making the state responsible for pricing and distributing these items is a much better alternative, as it puts the full onus of monitoring and sales on the Commonwealth, not on mom-and-pop stores. If it includes State Police monitoring IDs, all the better, as mom-and-pop stores shell out punitive fines for catching underage smokers.
In fact, tobacco and liquor should be put under state monopoly. If the state of New Hampshire can be successful in having State Liquor Stores, so can the Commonwealth. Let the convenience and liquor store lobby seethe - many have done a lax job in monitoring anyway and have the fines and multiple-day sales prohibitions to show for it. The Commonwealth will no longer have to shell out commissions or fees, and can be in direct competition with New Hampshire. It will also force the Commonwealth to defend itself against critics - "If smoking is so dangerous, why is the state being a enabler? Must be for the taxes, correct?"
2. Illustrate the total price -including wholesale, distribution and marketing fees, federal, state, and sales taxes - for a pack of cigarettes.
People are already angry that their cigarettes are pushing $9 a pack. $3.52 of that is federal and state tax, plus an additional 20-40 cents in sales tax. On the really cheap cigarettes - which last year were $4 and now are $6 - the wholesale prices really shock the dickens out of smokers, i.e. "They buy for this cheap and they sell it for this outrageous price?"
E.g. $4.00 wholesale per pack of premium cigarettes + $1.01 federal tax + $2.51 state tax + $0.38 sales tax = $7.91 per pack. Total tax take based on price - 50%.
E.g. $2.50 wholesale per pack of budget cigarettes + $1.01 federal tax + $2.51 state tax + $0.30 sales tax = $6.33 per pack. Total tax take based on price - 61%.
These taxes are far higher and easier to collect than the income tax of 35% - and everyone pays it. They are definitely regressive - meaning the poor, who pay little or no income taxes, will see themselves forking over almost 61% in tobacco taxes instead - hence the circular function of taxation in our country, from rich to the government in taxes, the government to the poor in entitlements, and then the poor back to the government in sin taxes and fees.
Another interesting thing to consider: when minimum wages in the 1970s were $1.25 per hour, a pack of cigarettes cost around 40 cents, so a MW earner could buy about 2 packs of cigarettes. Today, the state mimimum wage is $7.50, and now a pack of cigarettes costs $8 and effectively prices a MW worker out of a pack of cigarettes by 50 cents, yet it also removes one potential revenue source. The government loses out on tax revenue when a MW worker cannot afford to buy the premium cigarettes at $8 a pack.
3. For those who wish to quit, the lure of free money is always the best incentive.
The Commonwealth should institute a program that encourages people to quit. Take a sliver of all that tax money collected from smokers and offer them a deal - go into a smoking cessation program (with patches, chewing gum, pills and the like) and if they successfully complete a six month program, you can take $2,500 off your taxes. After that, all that money in taxes you spent on cigarettes is yours to keep and save - and invest wisely.
4. For once and for all, investigate the effects of tobacco, free of politics and lobbyists - and then release the results to the public and take appropriate action.
If independent research - free from lobby groups, rigged numbers that trill of the tip of the tongue, and others - determine that tobacco is indeed dangerous and has caused deaths and health problems, then the people and the Commonwealth can come to an agreement on what the next step is. If a ban is appropriate, then so be it. If putting gross pictures of cancer victims will be an effective deterrent, even better.
Aside (in honor of Kate Jackson at Pointy Universe): When I watch those ads on TV with the young college kids demonstrating all the icky things that happen when you smoke, or all that statistical mumbo-jumbo, I think to myself, "What do they do afterwards? I know...they pull out a big fat joint and take a hefty drag on it." (Yes, Kate - this proves I do read your blog!)
But giving the responsibility of research to the tobacco or anti-tobacco lobby invites trouble, as the statistics can be skewed one way or the other to their favor.
Not all of you will agree with my proposals. They are ideas worth considering, however.
3/27/2009
Grandma got run over by the DOR
I don't condone smoking, but I just noticed that cancer sticks, over the past decade or so, have more than doubled in price. You could get a generic brand of smokes for $2, and a name brand for $3. Today, a generic pack costs $5.50 and a name brand pack is $7.50. This is due to our $2.51 state tobacco tax and the new $1 or so tax to fund children's health care. Cross the border into New Hampshire, and the prices are slightly less.
One industrious lady went the route of getting generic cigarettes from an Native American Smoke shop. One carton of their brand goes for the rock-bottom price of $14.89 - which comes out to 79 cents a pack. Pretty good deal, right? And the Native Americans, since they operate from a sovereign nation (aka the reservation), don't charge taxes on what they sell. You can get name brand cigarettes for $35 a carton - a huge savings over Massachusetts' $150 per carton.
But the Native Americans, making sure they keep kosher with the states, report whoever buys their cigarettes to the tax rolls of each state. As a result of buying 5 cartons of Seneca unfiltered cigarettes, this woman now must pay an additional $91.58 to the state. And, she's refusing to pay, even if they levy penalties and interest.
Let's calculate what's going on here. $14.89 times five cartons is $74.45. In order to tack on $91.58 to her bill, the tax on each additional carton must be $18.316, making her actual purchase (in the eyes of the Commonwealth) $166.03 - or $33.21 a carton. Why would the state chase this woman over cheap generic cigarettes at $33.21 a carton when there are bigger fish to fry - the people who fork over $150 for name brand cigarettes? Maybe it's because the Native Americans have a much better handle on freedoms and what it means, versus the health neurotics who can't seem to keep their germophobic mitts out of other people's business - and if they had a chance, not only would they not hand over names, they'd tell the states what rabbit hole to go down to?
When cigarettes and tobacco are banned from the state, I can tell exactly who's going to need the bigger nicotine patch - the Mass DOR, as billions of tax dollars generated from cigarette and tobacco sales fund everything the desire, and you bet they'll have a jones worse than a heroin withdrawal once that tax money goes away.
One industrious lady went the route of getting generic cigarettes from an Native American Smoke shop. One carton of their brand goes for the rock-bottom price of $14.89 - which comes out to 79 cents a pack. Pretty good deal, right? And the Native Americans, since they operate from a sovereign nation (aka the reservation), don't charge taxes on what they sell. You can get name brand cigarettes for $35 a carton - a huge savings over Massachusetts' $150 per carton.
But the Native Americans, making sure they keep kosher with the states, report whoever buys their cigarettes to the tax rolls of each state. As a result of buying 5 cartons of Seneca unfiltered cigarettes, this woman now must pay an additional $91.58 to the state. And, she's refusing to pay, even if they levy penalties and interest.
Let's calculate what's going on here. $14.89 times five cartons is $74.45. In order to tack on $91.58 to her bill, the tax on each additional carton must be $18.316, making her actual purchase (in the eyes of the Commonwealth) $166.03 - or $33.21 a carton. Why would the state chase this woman over cheap generic cigarettes at $33.21 a carton when there are bigger fish to fry - the people who fork over $150 for name brand cigarettes? Maybe it's because the Native Americans have a much better handle on freedoms and what it means, versus the health neurotics who can't seem to keep their germophobic mitts out of other people's business - and if they had a chance, not only would they not hand over names, they'd tell the states what rabbit hole to go down to?
When cigarettes and tobacco are banned from the state, I can tell exactly who's going to need the bigger nicotine patch - the Mass DOR, as billions of tax dollars generated from cigarette and tobacco sales fund everything the desire, and you bet they'll have a jones worse than a heroin withdrawal once that tax money goes away.
1/28/2008
Smoking - an addiction for people and politicians
My mother quit smoking on New Years Day 1991, and she does not miss the habit. Back in 1991, there weren't as many finger-waggers telling her all of those lovely chemicals she's putting into her body, and a pack of cigarettes cost about $2 a pack. Today, thanks to an excise tax of $1.51 per pack of cigs, the cheapest you can get a pack of cigs is $3.50, with the name brands clocking in at least $5.00. In New York State, a pack of cigarettes goes for at least $6 - and in New York City, you can't even get an ultra-cheap (as in no-name, you've got to be desperate) pack of cancer stix for less than $8.
When I went to Mohegan Sun for my birthday last year, I would have expected cigarettes to be much cheaper. Boy, was I wrong: a pack of Marlboros went for the princely sum of $9.65 per pack. (I have no clue how much the cheapos were, but a sawbuck? They were also selling bars of soap with real money for $13.95 - and of course, stupid me bought one. I did, however, use that dollar inside the bar of soap to play the daily numbers and ended up winning $721.)
In some of the New York State Indian reservations, however, you can still get name-brands for more than half the price. Why? The Indians kinda sorta don't put tax stamps on the packages.
This means the bridge & tunnel folks from Queens and Brooklyn (and their Manhattanite friends) who don't want to venture into their corner bodega can take a quick trip to the Hamptons for a family "visit" and stop by the Shinnecock Indian rez for a carton of Newports at $50. If their corner bodega is selling them for $8.50 a pack, that's $170 a carton there versus $50 (and $2.50 a pack) at the rez, meaning a savings of $120 per carton. No wonder the Indians in New York State like business the way it is, and the wholesalers are a bit miffed.
And believe the wholesalers with a fisheye when they say the cheap cigs are funding terrorism. Wholesalers who deliver to stores get a commission on all the sales they make, no matter what the price. So, when they go into the convenience store and set up their displays, it's not to make sure the lady in a bikini is not showing too much bodacious ta-ta; it's because that bodacious ta-ta is the difference between a stale pack that doesn't get sold and several hundred orders, perhaps with the bodacious ta-ta exposed. The wholesalers are blowing as much smoke to deceive the public; if the black market were as thriving as the wholesalers would have you believe, then New York City would have returned to the glorious cesspool of iniquity it once was. It hasn't, and it looks like the wholesalers are ticked that Indian tobacco sellers are cutting into their commissions and profits.
It doesn't mean I approve of smoking. I don't smoke myself, and I personally don't care if you light up, and I will not stop you if you're puffing away (if you ask nicely, all the fuss you'll get is a friendly hand wave and a "g'right ahead.").
Imagine, though, if cigarettes were ultimately banned. Everyone stopped smoking, no one got dirty looks when you lit up, and you didn't smell like an ashtray.
The politicians would have a hell of a time getting over their addiction - to smoker's money.
Here in Massachusetts, the excise tax for a carton is $1.51 x 20 = $30.20. $30.20 is not chump change, and a million cartons not being lit up means $30.2 million denied to the Commonwealth's coffers. Hence, you will see increasing and more constrictive rules on smoking, but you will never, ever see a complete ban, because once the commonwealth or any other state bans smoking completely, they lose hundreds of millions of dollars in easy, regressive tax revenue. The nanny state is not bold or ballsy enough to do a total ban, so they must do their deeds in passive-aggressive steps.
If there's anyone who really must get an intervention, it's the governments who use their insecurities and moralities to control people. Smoking is that perfect example: if smoking were banned, the states would require cases of Nicorette Tax patches.
When I went to Mohegan Sun for my birthday last year, I would have expected cigarettes to be much cheaper. Boy, was I wrong: a pack of Marlboros went for the princely sum of $9.65 per pack. (I have no clue how much the cheapos were, but a sawbuck? They were also selling bars of soap with real money for $13.95 - and of course, stupid me bought one. I did, however, use that dollar inside the bar of soap to play the daily numbers and ended up winning $721.)
In some of the New York State Indian reservations, however, you can still get name-brands for more than half the price. Why? The Indians kinda sorta don't put tax stamps on the packages.
This means the bridge & tunnel folks from Queens and Brooklyn (and their Manhattanite friends) who don't want to venture into their corner bodega can take a quick trip to the Hamptons for a family "visit" and stop by the Shinnecock Indian rez for a carton of Newports at $50. If their corner bodega is selling them for $8.50 a pack, that's $170 a carton there versus $50 (and $2.50 a pack) at the rez, meaning a savings of $120 per carton. No wonder the Indians in New York State like business the way it is, and the wholesalers are a bit miffed.
And believe the wholesalers with a fisheye when they say the cheap cigs are funding terrorism. Wholesalers who deliver to stores get a commission on all the sales they make, no matter what the price. So, when they go into the convenience store and set up their displays, it's not to make sure the lady in a bikini is not showing too much bodacious ta-ta; it's because that bodacious ta-ta is the difference between a stale pack that doesn't get sold and several hundred orders, perhaps with the bodacious ta-ta exposed. The wholesalers are blowing as much smoke to deceive the public; if the black market were as thriving as the wholesalers would have you believe, then New York City would have returned to the glorious cesspool of iniquity it once was. It hasn't, and it looks like the wholesalers are ticked that Indian tobacco sellers are cutting into their commissions and profits.
It doesn't mean I approve of smoking. I don't smoke myself, and I personally don't care if you light up, and I will not stop you if you're puffing away (if you ask nicely, all the fuss you'll get is a friendly hand wave and a "g'right ahead.").
Imagine, though, if cigarettes were ultimately banned. Everyone stopped smoking, no one got dirty looks when you lit up, and you didn't smell like an ashtray.
The politicians would have a hell of a time getting over their addiction - to smoker's money.
Here in Massachusetts, the excise tax for a carton is $1.51 x 20 = $30.20. $30.20 is not chump change, and a million cartons not being lit up means $30.2 million denied to the Commonwealth's coffers. Hence, you will see increasing and more constrictive rules on smoking, but you will never, ever see a complete ban, because once the commonwealth or any other state bans smoking completely, they lose hundreds of millions of dollars in easy, regressive tax revenue. The nanny state is not bold or ballsy enough to do a total ban, so they must do their deeds in passive-aggressive steps.
If there's anyone who really must get an intervention, it's the governments who use their insecurities and moralities to control people. Smoking is that perfect example: if smoking were banned, the states would require cases of Nicorette Tax patches.
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