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CAGW | July 4, 2012
Tobacco Excise Taxes Burn Down Federal Revenues
An April, 2012 Government Accountability Office (GAO) report has corroborated CAGW’s long-standing position that excise taxes on products like tobacco almost never produce the projected revenue. The report found that excise tax increases on certain tobacco products mandated by the Children’s Health Insurance Reauthorization Act of 2009 (CHIPRA) have resulted in dramatic shifts by manufacturers and consumers toward lower-tax products. Specifically, the implementation of higher taxes on roll your own tobacco and small cigars has led to increases in the production and consumption of pipe tobacco and large cigars, which have conversely decreased federal revenues. According to GAO, since CHIPRA was enacted in April, 2009 through the end of fiscal year 2011, the U.S. Treasury lost an estimated $615 million to $1.1 billion in revenue due to manufacturer and consumer transitions from roll your own tobacco to pipe tobacco. As CAGW has long held, federal and state lawmakers should avoid raising excise taxes to address budget shortfalls and instead focus on eliminating wasteful spending and cutting taxes to spur economic growth. Read more about GAO’s findings on tobacco excise taxes.
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