Obama Signs Federal Cigarette Tax Hike

President Barak Obama signed the Insurance Program Reauthorization Act of 2009, providing a major expansion of the State Children’s Health Insurance Program (SCHIP) to provide health insurance to moderate-income families and illegal aliens.

This government handout is funded with an increased federal tobacco tax.

  • Increase U.S. Federal Tax on a pack of cigarettes from $0.39 to $1.01 per pack
  • Increase Federal tax on pipe tobacco from $1.0969 per pound to $2.83 per pound
  • Increase Federal tax on RYO tobacco from $1.0969 per pound to $24.78 per pound
  • Increase Federal tax on cigarette papers (50 or less) from $0.0122 to $0.0315
  • Federal tax on cigarette tubes (50 or less) = $0.0244 – New rate is $0.0630

Of course, the unintended consequences of this socialist bill will come back to haunt the collectivists who supported this nonsense.

When fewer people buy taxed cigarettes, the SCHIP program will suffer budget shortfalls requiring them to either scrap the program, turn to another group to redistribute income, or raise taxes on the entire population. The latter is the most likely scenario as these collectivists continue to push their nationalized health care programs.

The growing black market for cigarettes will also likely explode as more people turn to alternative sources for cigarettes. And, who can blame low income folks that can’t pay for their own insurance now required to pay for insurance of families earning far more than they. It’s not fair to those burdened with these higher taxes to shoulder more of the socialist load.

Already facing budget shortfalls, many states will be hurt by the reduced revenue collected as part of the Tobacco Settlement Agreements. The amount paid by participating manufacturers is adjusted annually based on the volume of their shipments. With shipments being reduced, so will the revenue to the states.

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