July 23, 2010

The Alcohol and Tobacco Tax and Trade Bureau requests public comments on standards that have been proposed to distinguish between pipe tobacco and roll-your-own tobacco for Federal excise tax purposes based upon certain physical characteristics of the two products.  We also request comments on any other physical characteristics that may be used for such purposes.  Comments on Notice No. 106 are due on or before September 20, 2010.

Read the Notice and Learn How to Submit a Comment

Treasury Decision TTB – 85:  Increase in Tax Rates on Tobacco Products and Cigarette Papers and Tubes; Floor Stocks Tax on Certain Tobacco Products, Cigarette Papers, and Cigarette Tubes; and Changes to Basis for Denial, Suspension, or Revocation of Permits

The Alcohol and Tobacco Tax and Trade Bureau is adopting as a final rule, with minor technical changes, temporary regulations that implemented certain provisions of the Children’s Health Insurance Program Reauthorization Act of 2009. The regulatory amendments involved increases in the Federal excise tax rates on tobacco products and cigarette papers and tubes, the floor stocks tax provisions of the Act, and the new statutory criteria for denial, suspension, or revocation of tobacco permits. This final rule is effective on August 23, 2010.

Read the Final Rule

This tax is no pipe dream
February 5, 2010

I am a college professor. My job description therefore requires that, among other things, I wear a tweed sport coat with leather elbow patches, grow a beard, spend two days a week in the classroom, and smoke a pipe.

That last essential trait is now under attack. A bill before Congress proposes to increase the federal excise tax on pipe tobacco, making it equal to the recently enacted tax on loose cigarette tobacco purchased by smokers who “roll their own.” If passed, the bill would tax pipe tobacco at nearly $25 per pound, an increase of 775 percent over the current level.

Tobacco smoking is bad for one’s health. To my knowledge, however, no scientific studies have been conducted showing that pipe smokers (or cigar smokers, for that matter) have shorter lives than nonsmokers. There certainly is no evidence that nonsmokers who are exposed to environmental pipe or cigar smoke are harmed by it. Indeed, every person who smells the ambient odor of my pipe says that they are reminded of their fathers or grandfathers.

So, why are pipe smokers selectively being targeted by Washington? The answer is political opportunism. The federal government has been on a spending binge since George W. Bush occupied the White House. Over the past nine years, America’s taxpayers have been burdened with unprecedented expansions in the federal budget to finance new educational mandates (“No Child Left Behind”), new healthcare initiatives (Medicare Part D, to pay for granny’s meds), two wars on terrorism (Iraq and Afghanistan), failed economic “stimulus” plans and the bailouts of irresponsible financial institutions.

With annual budget deficits now running at $1.4 trillion, Washington is desperate for revenue enhancements (i.e., new sources of tax revenue). Rather than increasing taxes on a broad basis, which predictably would elicit broad-based opposition from already overburdened taxpayers, it is politically expedient to single out minorities who cannot bring effective power to bear in the legislative marketplace. And so we have seen proposals to tax those who have sacrificed wages in return for generous, “Cadillac” health-insurance plans, to tax the consumers of junk food and carbonated soft drinks, and to tax transactions in common stocks.

It is naïve to think that our elected representatives are attentive to the public’s interests. What presidents and the members of Congress do in practice is to transfer wealth to the special interests that are critical to their re-election prospects. It is therefore not surprising that they finance those wealth transfers by taxing groups that are not important to them electorally.

And so the tax burden falls most heavily on anyone, anywhere who is politically impotent, especially if they can be portrayed as the consumers of products that, on the flimsiest of scientific evidence, harm themselves or impose costs on others.

That mindset unleashes the nanny state to run amok. Pipe and cigar smokers are no threat to the public’s health. Even if smoking a pipe or a cigar harms the consumers of those products, that harm is borne privately and thus is not an issue of public policy concern.

But it unfortunately is if tax policy is predatory, with the aim at raising revenue from any group that cannot marshal effective political opposition to it. Perhaps it is time to add pipe tobacco, junk food and soft drinks to the agendas of the tea parties now being organized to oppose a government that is everywhere more intrusive.

William F. Shughart II, a senior fellow at the Independent Institute, is F.A.P. Barnard Distinguished Professor of Economics at the University of Mississippi. He is the editor of Taxing Choice: The Predatory Politics of Fiscal Discrimination (Independent Studies in Political Economy)
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