Proposed federal tobacco tax may cost more than it earns | News, Sports, Jobs

J. Scott Applewhite / AP Photo Senate Majority Whip Dick Durbin, D-Ill., To left of Senate Majority Leader Chuck Schumer, DN.Y., speaks to reporters as lawmakers work to pass the US $ 1 trillion bipartisan infrastructure bill Dollar advance Washington Capitol, Tuesday.

HOUGHTON – On April 22nd, the US Congress tabled a proposal to introduce the first federal e-cigarette tax in history while increasing the tobacco tax.

US Senate Majority Whip Dick Durbin (D-Ill.) And the Chairman of the Senate Finance Committee, Ron Wyden, (D-Ore.), Together with the US MP Raja Krishnamoorthi (D-Ill.) And seven other Democrats im Senate supported the Tobacco Tax Equity Act of 2021, which would make changes to the Internal Revenue Code of 1986, explained CPS News (cpsdailynews.com) in an April 23 report. The main goal of the bill, according to Durbin, is to reduce youth tobacco use by closing loopholes in tax law, which he believes the tobacco industry is exploiting to avoid regulation and taxes on its products.

There are others who disagree with the Democrats on the implications of the bill, should it pass. On August 5, Michigan Campaign Confidential (https://www.michigancapitolconfidential.com/governments-light-up-cigarette-smuggling) argued that the excise tax, instead of reducing tobacco use, would simply increase cigarette smuggling across the country, too in Michigan:

“Michigan and other states have a smuggling problem and it could get worse.” the ed-op states. “A bill was passed in Congress earlier this year that would increase federal excise tax by $ 1.00 per pack, making smuggling into the country even more attractive.”

At the same time, the US Food and Drug Administration (FDA) is pushing for a complete ban on menthol-flavored cigarettes, which, according to Capitol Confidential, will have the opposite effect.

“Menthol cigarettes make up more than 30% of the flammable cigarette market” the ed-op counter. “Implementing any of these changes alone would spark cigarette smuggling, but when you put them together, you run the risk of dramatically increasing the pool of tax evaders in America.”

The Campaign Confidential stated that high excise taxes are driving people and organized crime cells to look for cheaper alternatives in order to save and make money.

“We estimate that by 2019 almost a fifth of all cigarettes consumed in the Great Lake State – 19% to be precise – were smuggled out of another tax jurisdiction.” it says in the editorial office. “That’s just one reason why lawmakers should be cautious about even higher cigarette excise taxes. The current US $ 2.00 per pack imposed by the state is enough to encourage significant smuggling. “

The Tax Foundation found that Michigan, which levies a $ 2.00 excise tax on cigarettes, saw a positive 19.7 percent inflow in 2018 from consumer smuggling, which traditionally consisted of consumers buying cigarettes in low-tax countries and then moving into High tax countries for sale. While this practice is widespread in the United States, other methods of evading federal, state, and local taxes are popular. This was announced by the tax foundation. One way that criminals increase their profits is to avoid the legal market altogether. They make counterfeit cigarettes with the look and feel of legitimate brands and sell them with counterfeit tax stamps. Many of these products are smuggled out of China, with one source estimating that Chinese counterfeiters produce 400 billion cigarettes annually to meet international demand.

On March 15, 2021, the Campaign for Tobacco-Free Kids (tobaccofreekids.org) found the following: “Every state that has significantly increased its cigarette tax has achieved significant increases in income, even if smoking has been reduced. Higher tobacco taxes also save money by lowering health care costs related to tobacco, including spending on Medicaid. States can achieve even greater health benefits and cost savings by using a portion of the proceeds towards programs that discourage children from smoking and help smokers quit. “

However, data does not support this claim. The Capitol Confidential values ​​the degree to which cigarettes are imported from nearby locations such as Indiana compared to those shipped from greater distances such as North Carolina.

“We divide the types of smuggling into two categories: casual and commercial smuggling” it says in the report. “In the case of casual smuggling, individuals typically pick up a small number of smoking products for personal consumption in a different tax jurisdiction and then bring them home. Of Michigan’s total smuggling rate, around 11 percentage points can be attributed to this behavior. The rest concerns larger long-distance transports. “

The comment cited an example from Michigan State Police reporting illegal smoke arriving from overseas and being picked up at UPS branches in East Lansing, West Bloomfield, Farmington Hills, Southfield, Howell, Westland and Ann Arbor, among others. The recipient was a Chinese citizen and Michigan State University student who reported that he kept 21 different keys for mailboxes in UPS branches where he would receive the cigarettes. During his first interview with the police, he gave investigators the tracking numbers for 18 packages that were still going to Michigan from China. At a UPS facility in Ann Arbor, police learned from a local agent that an estimated 76 packages were received for the suspect at that one address and an apparent accomplice from February to December 2019.

The Michigan Dept. of Treasury has tried to positively influence unspecified revenues that the state has spent on the smuggling problem, and states the following on its website:

“Since the Tobacco Tax Act was passed in 1994, the Michigan State Police Tobacco Tax Team has worked with the Michigan Department of Treasury, the Michigan Attorney General, and the Michigan Department of Community Health to enforce the law. The team has made more than 668 arrests and seized more than 291,160 packets of cigarettes valued at an estimated $ 6.8 million.

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