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Obama's Cigarette Tax Hike
President Obama signed into law a bill that raised federal cigarette taxes from 39 cents a pack to $1.01 cents per pack, the single largest cigarette tax hike in history. A carton of cigarettes will now see a price increase of about $10.10. These taxes are to finance a huge expansion of health insurance for children that the President has planned. Other tobacco products will also see large tax increases. For example, chewing tobacco taxes will go from 19.5 cents per pound to 50 cents. The cap on cigars has also been raised from 4.9 cents to 40.26 cents. Almost $33 billion dollars is expected to be raised from these tax increases over the next four and a half years.
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Many major cigarette companies increased their prices back in March, a month before the tax took effect. Although the tax increase raised prices 61.6 cents per pack, many companies raised their prices by more than that. Phillip Morris, for example, raised the price on many major brands by 71 cents per pack. RJ Reynolds Tobacco Co., on the other hand, raised its cigarette prices by 41-44 cents per pack and reduced the discount it offers to retailers to keep its bottom line. There are a number of states with combined state-local tax rates above $3, with New York City leading the way with a tax rate of $4.25 per pack. The current overall tax charged by states is $1.25 per pack, in addition to the $1.01 federal tax rate. Most companies are also expecting a decline in sales, although smokers insist that they won't quit smoking.
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Benefits to Higher Cigarette Taxes
The United States Centers for Disease Control and Prevention currently estimates that each pack of cigarettes sold in the United States translates to $10.28 in smoking-caused health costs. Consider that each pack of cigarettes on average costs consumers $4.84. Many states use their tax money from cigarette sales to fund tobacco control programs, helping youth and adults quit smoking and fighting cigarette addiction. Adolescents and young people are much more hard hit by increases to the tax increase because they often have little money. Tax increases to cigarettes helps youth quit smoking, often before they even start.
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"Single Largest Cigarette Tax Hike Goes Into Effect Wednesday." FoxNews.com. 29 March 2009. 27 May 2009. http://www.foxnews.com/politics/2009/03/29/single-largest-cigarette-tax-hike-goes-effect-wednesday/
Jason Hanna, Jim Spellman, John Couwels, Alan Silverleib and Patrick Oppmann. "Smokers feel abused as federal tax hike hits." CNN.com. 1 April 2009. 27 May 2009. http://www.cnn.com/2009/US/04/01/cigarette.tax/index.html
"2009 State Cigarette Excise Taxes." National Conference of State Legislatures. May 2009. 27 May 2009. http://www.ncsl.org/programs/health/cigarette.htm