President Barack Obama Says He Didn't Raise Taxes Once, But He Did

In an interview with Bill O'Reilly, President Barack Obama said, "I didn't raise taxes once. I lowered taxes over the last two years." However, fact checkers were quick to point out that the President has in fact raised a few taxes including those levied on cigarettes as well as the tax implications of health care reform. Income taxes? Sure, those have not gone up, but as for other taxes… President Obama seems to have a selective memory.

From PolitiFact.com:

Looking at the whole statement, he's both right and wrong. For clarity's sake, we're going to take Obama's statement in two parts. Here, we'll look at his statement, "I didn't raise taxes once." In a separate report, we'll look at his statement, "I lowered taxes over the last two years."

The idea that Obama did not raise taxes is just plain wrong. He signed legislation raising taxes on cigarettes and other tobacco products soon after taking office; that money goes to pay for children's health insurance programs. The law went into effect in 2009. He also signed the health care law, which includes taxes on indoor tanning that went into effect last year. (Regular PolitiFact readers will remember our fact-check of reality TV star Snooki and her complaint about the new tax last year.)

The new health care law also includes a tax on people who decide not to have health insurance, as an incentive for them to get coverage. The tax phases in gradually, starting in 2014. By 2016, the tax would be $695 per uninsured person up to a maximum of three times that amount, or $2,085. The law includes exemptions for people who can't find affordable insurance, and a few other special circumstances.

More significantly, the health care law includes new taxes on the wealthy, starting in 2013. Individuals who make more than $200,000 and couples that make more than $250,000 will see additional Medicare taxes of 0.9 percent. They will also, for the first time, have to pay Medicare taxes on their investment income at a 3.8 percent rate. (Current law is that all workers and employers split a 2.9 percent Medicare tax; the self-employed pay all of it.)

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Recent State Taxing Trends you Should Know About

As numerous state and local government agencies struggle with their budgets, many have taken to new taxes, or tax increases to makeup for lost revenue. Whenever a state is able to collect a decent amount of funds because of a new tax law change, other government agencies are quick to notice and enact a similar tax increase of their own. To help the readers of my blog stay informed on taxes they might have to pay down the road, I have compiled the following list of recent state taxing trends to be aware of.

Cigarette Tax Hikes

Taxes levied on cigarettes and other tobacco products are not new, but recently a handful of states have been increasing their cigarette tax rates. As I explained in this blog entry last month, New York has the highest tax on cigarettes and with recent increases the state levies an estimated $4.35 on every pack. Additionally, other states have been increasing tobacco taxes as an easy source of revenue. South Carolina – a state with a long history of tobacco farming – has even increased the taxes on cigarettes from 7 cents, to 50 cents per pack. The governor vetoed the tax law, but legislators had enough votes to override the veto. As local government agencies continue to look for ways to increase revenue, you can expect to see more cigarette tax increases over the next few years.

Other Sin Taxes

Taxes levied on cigarettes and other tobacco products, commonly referred to as “sin taxes,” also include taxes on other products that legislators consider bad for your health such as alcohol or sugary beverages. In addition to tobacco taxes, you are likely going to see other sin tax increases. The federal government has helped start this trend with their new tanning tax, and the state of NY already considered a soda tax (although lobbyists successfully defeated this new tax).

Amnesty Programs

Although not a new tax increase, local amnesty programs are something you should be aware of. The city of Philadelphia recently executed an unpaid tax amnesty program, where delinquent taxpayers could pay the taxes they owed, and only half of the interest that would normally be due. Philadelphia’s program was extremely successful – estimates predict around $25 million in additional revenue for the city – and because of its success you can bet that other state and local taxing agencies will launch amnesty programs of their own.

Digital, Non-Tangible Property

One of the largest trends in state sales tax laws is likely to be on digital, non-tangible property. Historically, excise taxes are only levied on tangible property, but as the need for tangible products diminishes, local governments are expected to begin charging a tax on electronic transmissions. Therefore, when you go to purchase a game, mobile app, or even an Mp3 on iTunes, you might have to pay a local sales tax. Most states have sales tax laws that were written long before today’s “digital age,” and legislators are looking for ways to generate revenue from digital sales.

The “Amazon Tax”

In 2008 the state of New York implemented an “Amazon Tax,” which targeted out-of-state retailers such as Amazon.com and Overstock.com. Both popular online retailers actually challenged the tax law, but the courts sided with New York. The result was a tax on in-state businesses that show ads linking to a retailer’s site, and has supposedly generated additional revenue for the state. As such, other states including California, Connecticut, Maryland, North Carolina, and Tennessee are considering similar tax laws.

NY: Get Ready for $11 a Pack Cigarettes

Yesterday legislators from New York passed a bill that will levy an additional $1.60 in excise taxes on every pack of cigarettes sold in the state. The new tax is scheduled to take effect July 1^st, and will increase the total taxes on a pack of cigarettes to $11. Check out the following CNNMoney.com article on this recent development.

New York City smokers already pay the highest cigarette taxes in the nation, but a new state law will push those taxes even higher this summer.

The state legislature on Monday approved a bill adding an additional state tax of $1.60 to every pack sold, effective July 1. This bill, which was signed by Gov. David Paterson on Monday, will raise the state tax to $4.35 per pack.

New York City smokers pay an additional municipal tax of $1.50 per pack, for a current total tax of $4.25 per pack. That's the highest state-local tax whammy in the country, according to the Campaign for Tobacco-Free Kids. Chicago is the runner-up, at $3.66 per pack.

This new tax increase means that smokers in the city will pay $5.85 per pack in taxes. This drives the average local price up to nearly $11 per pack, according to some estimates.

The tax hike is aimed at generating an additional $440 million in 2010-2011 tax revenue to support healthcare programs.

The bill also requires that taxes to be imposed on cigarettes sold at Indian reservations, including the Shinnecock Indian Nation, which was recently recognized by the federal government.

Washington Lawmakers OK $1-Per-Pack Cigarette Tax Hike

From BusinessWeek.com:

The Washington Legislature is adding $1 to the price of a pack of cigarettes.

The House and Senate both passed a higher tobacco tax on Monday night, as lawmakers worked to wrap up their special legislative session.

It's part of the Legislature's plan to raise close to $800 million in revenue for the state budget. The bill now goes to Gov. Chris Gregoire for final approval.

Starting on May 1, the tax of a pack of cigarettes increases to slightly more than $3. Taxes also will be raised on other products, such as cigars and chewing tobacco.

Democrats said the measure would raise money and discourage smoking, while Republicans said it could just drive tobacco purchases to other states or online.

CDC: States Not Putting Cigarette Tax Funds Into Efforts To Curb Smoking

Although, the federal government and over a dozen states have increased taxes on cigarettes, according to the CDC none of that money is going to smoking prevention programs. The CDC made this startling announcement yesterday according to this Reuters report.

Increases in cigarette taxes ranged from 10 cents per pack in North Carolina to $1 in Connecticut, Florida and Rhode Island. The average 2009 increase was 52 cents per pack.

As a result of the tax increases in the 14 states and Washington, D.C., the average state cigarette tax rose from $1.18 per pack in 2008 to $1.34 per pack in 2009, according to CDC.

In a CDC report released Thursday, the agency wrote that "cigarette excise tax increases can be even more effective in reducing tobacco-related death and disease" when used in conjunction with other tobacco-control measures. CDC added, "A 10% increase in the price of cigarettes can reduce consumption by nearly 4% among adults and can have an even greater effect among youths and other price-sensitive groups."

American Heart Association CEO Nancy Brown said that state lawmakers can help improve both public health and state finances by dedicating money from cigarette taxes to tobacco prevention programs, which she noted in some cases can reduce smoking among youth by up to 40%.

Cigarette Tax Bump in 15 States Lifts U.S. Fees to $2.35 a Pack

After cigarette taxes went up in 15 states during the year 2009, it brought the national average to an astounding $2.35 a pack. The average state tax assessed on a pack of cigarettes is $1.34, in addition to the $1.01 federal tax that was also increased last year. As this Bloomberg.com article explains, the various increases have resulted in more than $1 billion in new state and federal tax revenue.

Smoking rates in the U.S. fell about 15 percent in the last decade, though declines slowed in the last five years, according to the Atlanta-based CDC. Thomas Frieden, the agency’s director, has warned that decades of smoking reductions may be ending unless taxes increase and more money is spent on education.

“Increasing cigarette excise taxes is one of the most effective tobacco control policies,” the report’s authors wrote. “Additional increases in cigarette excise taxes and dedication of all resulting revenues to tobacco control and prevention programs at levels recommended by CDC could result in further reductions in smoking.”

Each $1-a-pack increase brings in about $9.1 billion in annual tax revenue, according to the report. A dollar increase, over time, also prevents about 1 million smoking-related deaths and stops 2.3 million children from becoming smokers, the CDC said.

Continue reading at Bloomberg.com…

Lawmakers Consider $1.50-Per-Pack Cigarette Tax Hike

California lawmakers are considering a controversial new cigarette tax increase as a solution to bring in some much-needed state revenue. Check out the following article on the debate surrounding the issue courtesy of the LA Times.com.

For years tobacco companies have successfully fought off attempts by California lawmakers and health groups to increase the cigarette tax. But next month, as the state grapples with the worst financial crisis in recent history, that may change.

Lawmakers will consider a proposal to hike cigarette taxes by $1.50 per pack and raise $1.2 billion annually. During the last decade, cigarette makers have spent tens of millions of dollars to kill 14 straight attempts to make smokers pay more.

But with the state facing a staggering $21.3-billion deficit and due to run out of cash in July, the tobacco tax could have a better chance of passing the Legislature.

"Given the serious budget shortfall we face, this is the year to pass the tobacco tax," said Sen. Alex Padilla (D-Pacoima). "It is needed now more than ever."

Padilla wrote the current proposal with Senate leader Darrell Steinberg (D-Sacramento), but even with Steinberg's support, it faces an uphill battle. The tobacco industry sees California as a crucial market and a trendsetter for anti-tobacco ideas that can spread through the country, said Beverly May, regional director of Campaign for Tobacco Free Kids, a Washington anti-smoking group.

"The tobacco companies view California very much as a battleground state," she said. "California is a state that they look at as important to do everything they can to have influence in any way they can."

Frank Lester, a spokesman for Reynolds American Inc., said proposals to raise tobacco taxes in California have failed in part because the state's residents are compassionate and see the tax as unfair.

"When people realize who the burden falls on -- the tax tends to be one of the more regressive taxes, meaning it falls on people of lesser means and working families -- they tend to think twice about it," Lester said.

He also said California voters are "dubious" about how past tobacco taxes have been spent. He cited media reports about the use of Proposition 10 tobacco proceeds, approved by voters in 1998 for childhood development programs, to pay for political ads promoting another ballot measure.

Forty-five states have raised tobacco taxes during the last decade, but not California.

Despite California's health-conscious image and laws that ban smoking just about everywhere, including bars and beaches, the state's cigarette tax of 87 cents per pack is lower than such taxes in other states. In Rhode Island, where tobacco taxes are highest, the levy is $3.46 a pack.

Federal Cigarette Tax to go up 62 Cents a Pack

From The Dallas News:

Lighting up in Texas – already a costly habit because of the state cigarette tax – is about to get more expensive.

A 62-cent federal tax increase on cigarettes starts April 1, but tobacco companies began raising prices this month in anticipation of the higher tax.

A big jump in the federal excise tax on cigarettes – from 39 cents a pack to $1.01 – is now being factored into prices charged by the major tobacco companies in advance of the April 1 effective date of the new rate.

Coupled with the higher state tax – $1.41 a pack – that went into effect two years ago, Texas smokers are paying $6 to $6.50 a pack for the more popular brands of cigarettes and hitting the $50 mark for a carton of the leading brands.

It's making some smokers wonder how much they're willing to pay.

Friday, Plano residents Mallory Carrick and Zach Mayer pulled casual drags from their cigarettes on a crowded Austin street corner, lamenting the tax hike just now hitting their pocketbooks.

"First we have to deal with the economy, and now the government," Carrick said. "I guess it's better that it's on cigarettes 'cause they're killing us, but still, what about our freedom?"

In town for the South by Southwest Music Festival, Carrick and Mayer said they're not heavy smokers, spending about $30 a week between them. But with the spread of local smoking bans, relatives battling cancer and now higher taxes, the 22-year-olds have plenty of reasons to stop.

Ronnie Freeman has been a smoker since 1973. Before the latest increase, he paid $4.75 for a pack of his favorite, Kool. Now he's paying a dollar more.

Higher Cigarette Tax Is Very Sensible

From The Wall Street Journal:

The Feb. 2 editorial "The New Poor Tax" is based on the same old faulty logic that manufacturers have been making for decades whenever cigarette tax hikes are suggested as a means of paying for social programs. There is no argument that cigarette taxes discourage consumption especially among the poor, who can least afford to be addicted to cigarettes.

Ninety-five percent of those who smoke say they regret their decision ever to start. The majority of smokers say they want to quit, so why is it so bad for the government to provide an economic incentive to help move smokers to cut down or quit? The U.S. has one of the lowest tax rates on tobacco in the world and the meager 39 cents-per-pack tax is hardly enough to pay for the massive annual medical bill caused by smoking.

By boosting the federal tax by the proposed 61 cents-per-pack to pay for the children's insurance fund, Congress will not only maintain a much-needed health insurance program but will also help reduce smoking.