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Raising Taxes on the Most Disadvantaged Americans

(a longer version of this TaxByte appeared in The Wall Street Journal

You just knew it was too good to be true. 

President Biden promised that Democrats could push through sweeping new spending programs without raising taxes on Americans making less than $400,000 per year. And now that the details are leaking out, at least some of the tax increases are going to hit Americans in the lowest socioeconomic categories. 

How? One item likely to be included is a doubling of the federal excise tax on cigarettes, from $1 to $2 per pack. In theory, the purpose of such “sin taxes” is to influence behavior by raising the cost and thus discouraging the purchase of cigarettes. 

But by now, most smokers who are willing or able to stop smoking have already done so, thanks to a decades-long public education campaign and the easy availability of smoking-cessation and reduced-harm options. If you’re still a smoker today, you’re likely unwilling or unable to access programs and treatments designed to help you stop smoking. 

Unsurprisingly, this still-smoking population is largely concentrated in the lowest socioeconomic categories. 

A 2017 survey by the Colorado School of Public Health found that “half to three-fourths of smokers have one or more low-socioeconomic disadvantages, and the lowest socioeconomic categories have the highest smoking rates.” In other words, tobacco use is now concentrated among the poorest, least advantaged members of our society. 

CDC data provides further specifics. Smoking is most prevalent among Native American and African American populations, with Asian Americans and whites smoking at much lower levels. Smoking is also much more prevalent among Americans who didn’t finish high school, with the smoking population decreasing at every step up the education ladder. 

It’s the same with household income. The lower your household income, the more likely you are to be a smoker. Twenty-one percent of Americans with an income under $35,000 are smokers, while only 7 percent of Americans who earn over $100,000 per year smoke. 

Doubling the tax on cigarettes, despite this degree of disparate impact on the disadvantaged, suggests Democrats aren’t quite as concerned about economic disparities and equity as they claim. 

If the purpose of the massive spending in the reconciliation package is to help needy Americans and advance inclusion and equity, you would think Democrats would not include provisions that literally double-down on taxes that affect the lowest-educated, lowest-income Americans.

In other words, if you are still addicted to nicotine, you are likely a low-income, poorly educated member of a minority community, and the Democrats plan to raise your taxes.