Some tax thoughts for your smoking break
This isn’t political site, but it is sometimes hard to avoid talking politics when it comes to taxation. As you dive into the corporate world you will be affected by much more than your annual income tax. There are tons of taxes out there and each are important to our way of life. Today, in light of current news, its the cig tax.
President Bush today vetoed a bill introduced to help fund health insurance for children. The SCHIP bill was slated to increase spending on children health insurance across the nation by $60 billion in 5 years. I don’t want to debate the merits of the bill or any bill of this nature. However, I did find some of it very interesting. I was more interested in how this would be funded, i.e. where was the tax revenue going to come from:
“The expansion of the State Children’s Health Insurance Program, which now covers about 6.6 million children - would cost $35 billion over five years and would be paid by raising the tax on cigarettes by 61 cents, to $1 a pack. Bush had proposed a $5 billion increase for the program, paid for out of general revenue.”
The cigarette tax increase is an interesting topic. The Center for Budget Policies and Priorities in Washington D.C. did a study on the effect of increased cigarettes tax on cigarette sales and tax revenue.
“Higher tobacco taxes discourage smoking. Most studies find that a 25 percent increase in the cost of a pack of cigarettes causes a decline in cigarette purchases of about 11 percent. Over the longer term, the decline may be deeper.”
Lawmakers often target cigarettes to make up for budget shortfalls because of a couple reasons. First, no one will argue that smoking is good for you and that reducing smoking through a punitive tax is bad. And second it doesn’t affect everyone, only smokers. Hope you find this interesting. At some point cigarette taxes will be bled dry, where then will the money come from?
One another note - I have been a little slow with blogging lately. Most people don’t realize tax accountants have two busy seasons. Yeah April 15th is busy, but what we don’t finish then, is due October 15th. I can see the light at the end of the tunnel!
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