Published on April 21, 2009
Back in February President Obama signed a bill into law to increase federal taxes on cigarettes from 39 cents to $1.01 a pack. No matter how smokers get their nicotine shot, they saw an enormous blow to their wallets when the largest increase on the federal tobacco taxes in the history of the US came into force last Wednesday.
Public Health activist groups consider the tax increase in times of economic downfall to be a major incentive for majority of smokers to kick down their habit. Federal taxes on all tobacco products are jumping to the sky in order to generate funding of medical insurance for children from low-income families. The corresponding law was signed by President Obama shortly after coming to the White House.
Not only cigarette smokers would suffer from the tax increase, all other tobacco containing products, from chewing tobacco to cigars, from pipes to snuff would encounter great tax increases as well. For instance, the tax on cigars jumps from 5 cents to 40 for each cigar, chewing tobacco comes up from 19.5 cents a pound to 50 cents. The estimated revenue for the tax increase is almost $33 billion that would be generated in the next four years.
Meanwhile, smokers across the country are looking for possible options. Smoking in front of a business center in downtown Chicago on Friday, 39-year-old Peter Acheson said that unbearable price for his favorite Marlboro Reds would definitely persuade him to give up his habit of 15 years since he would rather buy a present for his son than buy a carton of cigarettes.
His colleague, John Dawson admitted that the increase would not prevent him from smoking, however he would simply smoke less and buy discount brands instead of Camels that he had been smoking for twenty years. He also said that he had bought 20 cartons of Camels back in March when he had heard about the tax increase for the first time.
At the same time Congress is debating on the bill that would provide the Food and Drug Administration with the power to regulate the contents tobacco products that could lead to various bans like imposing the ban on menthol cigarettes. Thus, the federal tax increase was only the first step in the recharged struggle with smoking.
Therefore, diverse health organizations and groups shared their praise for the tax increase and enhanced efforts of the authorities to reduce the number of smokers in America. In each interview related to cigarettes, authorities are citing the same old maxim, stating that each time the cost of cigarettes jump the consumption of cigarettes falls.
According to Health Department statistics, 20% of adult Americans smoke cigarettes. Although this number is gradually declining, anti-smoking activists keep raising the alarm claiming that smoking is the biggest evil for the health of the nation.
Market analysts estimate that cigarettes sales would fall by around 5 per cent in the next twelve months. However, they are not sure about the following years as the economy would recover for the current recession. One of KPMG experts said that although the upcoming sales drop is inevitable, tobacco companies would be very profitable in the future.
Altria Inc., the owner of Philip Morris USA, the leading cigarette manufacturer in the United States and producer of Marlboro, is anticipating a decline; however they are not sure of the amount of that decline.
However, Philip Morris hastened to increase the price of America’s best-selling brand Marlboro by 71 cents in March as well as for all other brands. Their rivals followed their steps. The price increase frustrated retailers and customers. Many independent analysts and business consultants said that the greed and cupidity were the only reasons for that increase, and tobacco companies simply wanted to line their pockets on the threshold of expected sales declines.
Replying on massive criticism, Phillip Morris spokesman said that they have increased prices in order to cope with federal excise tax increase. He also said that dissatisfied people should consult their members of Congress instead of cursing manufacturers.
Several experts also have criticized the decision of the federal government. They say that the health insurance program expansion for millions of children is such a broad program that it should not be funded by taxes of one single group of tax payers, with the majority of them being from low-income class. Those people would simply give up smoking and the program would remain under funded. The tobacco companies are as well warning the authorities that the recent increase would make it almost impossible to sell cigarettes legally because many people would simply turn their heads to less expensive cigarettes sold online or in Indian reservations territories.
However, anti-smoking activists say that they would do their best to make the tobacco taxes much higher.
