Democrats’ Plan to Tax the Poor

Doubling the excise tax on cigarettes won’t make a dent in millionaires’ wallets.

By Tom Giovanetti. Mr. Giovanetti is president of the Institute for Policy Innovation. 

"You knew it was too good to be true. President Biden promised that Democrats could push through massive new spending programs without raising taxes on anyone making less than $400,000 a year. But despite Democrats’ best efforts to keep the tax increases a secret, the details are leaking out. Some tax hikes are going to hit Americans in the lowest socioeconomic categories.

One item likely to be included is a doubling of the federal excise tax on cigarettes, from $1 to $2 a pack. The purpose of such “sin” taxes is to influence behavior by raising the cost and thus discouraging the purchase of cigarettes. But this policy has diminishing returns. Most smokers who are willing and able to stop have already done so, thanks to a decadeslong public-education campaign and the easy availability of smoking-cessation options.

This still-smoking population is concentrated largely among the poor. 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.”  

CDC data shows that smoking is most prevalent among Native Americans and African Americans, with Asian-Americans and whites at much lower levels. Americans who didn’t finish high school have higher rates, with the smoking population decreasing at every step up the education ladder.

It’s the same with household income. The lower your income, the more likely you are to be a smoker. Of Americans who earn less than $35,000, 21% smoke, while only 7% of Americans who earn over $100,000 do.

That’s why the Tax Foundation finds that increases in excise taxes on tobacco burden the lowest income earners 37 times as much as equivalent funds raised through income taxes. The proposal to double the tax on cigarettes suggests that Democrats aren’t as concerned as they claim about economic inequality. If the purpose of the massive spending in the current reconciliation package is to help needy Americans, Democrats would not include provisions that double taxes affecting Americans with the lowest education and lowest income.

A more compassionate response would make it easier for smokers to vape and use electronic cigarettes, which are up to 95% less harmful than regular cigarettes. Moving smokers to such products would create significant improvement in public health.

But the Democrats’ reconciliation proposal increases taxes not only on cigarettes but also cigarette alternatives as part of a plan to equalize taxation of nicotine. They are taxing reduced-harm nicotine products at exactly the same higher rate as cigarettes.

If you are still a cigarette smoker, you are likely a low-income, poorly educated member of a minority community—and the Democrats want to raise your taxes."