Tobacco tax hikes that would have seen more than a 1,600% increase for RYO tobacco were removed from the latest Build Back Better bill draft. (Picture courtesy of Communication Workers of America CWA.org)
Previously-proposed tobacco tax hikes included in the Biden Administration’s Build Back Better Act (HR 5376), were removed from the latest version of the proposed bill. The tax hikes, proposed by Illinois Senator Dick Durbin to raise $96 billion included doubling taxes on cigarettes, small cigars, and roll-your-own tobacco; a more than 1,600% increase on taxes on pipe tobacco and snuff; a more than 2,000% increase on chewing tobacco tax; and new taxes for vape products.
The proposed tax hikes drew concern that it would actually hit people with low income the most. The Tax Foundation said, “As a source of general fund revenue, the tax is exceedingly regressive. The vast majority of smokers have lower incomes, and tobacco is one of the few goods that have an inverse relationship with income in that consumption increases as income decreases.” Data from the Institute on Taxation and Economic Policy show that higher tobacco taxes do not have any significant affect on the top 20% in the US, but would increase the taxes of the poorest 20% by four-tenths of one percentage point.
Kentucky governor, Andy Beshear, strongly came out against the proposed tobacco tax increases, publicly criticizing them as “unfair” and “inexplicable.” In a letter Beshear wrote to President Biden, he said, “Kentucky’s agricultural sector will bear a costly and outsized burden under the current tobacco excise tax proposal in Congress. A disruption of this magnitude could create a harmful ripple effect throughout the agricultural supply chain, and devastate an industry already hit hard over the years.”
Beshear also said the taxes would have “an estimated negative economic impact in the commonwealth could reach as high as $65 million, including 295 fewer jobs, $11.6 million in lost wages and $28.8 million less in state and local revenue.”
Even though the most recent version of HR 5376 does not mention tobacco tax increases, there is still a possibility they might make a comeback in a future version.