New Federal Tobacco Tax Means Michigan Smokers Getting Double Taxed

How Michigan Smokers Will Be Affected by a Double Tax on Tobacco

Paul Wilson, Yahoo! Contributor Network
Mar 5, 2009 "Share your voice on Yahoo! websites. Start Here."

According to the U.S. Department of Treasury, on April 1st of this year the Federal Government will be raising the tax on a pack of cigarettes from 39 cents per pack to $1.01 per pack. Federal taxes on all tobacco products will be rising dramatically as well. Cigars, snuff, pipe tobacco, chewing tobacco, rolling tobacco and all rolling accessories will be taking a serious hit. The primary reason given for raising the federal taxes on tobacco products is for expanding low-income children's health insurance.(SCHIP)

Federal tobacco tax increases:

Large cigar tax will go up to about 40 cents per cigar from a nickel per cigar.
Small cigar tax will go up to a $1 per pack from 4 cents.
Pipe tobacco tax from $1.10 per pound to $2.83 per pound.
Chewing tobacco tax from 19.5 cents to 50.3 cents per pound.
Snuff tax from 53.5 cents to $1.51 per pound.
Loose tobacco tax (roll your own) from $1.10 to $24.78 per pound.

In a recent Detroit News article by Chris Christoff, it was noted that Michigan's Governor Granholm also wants to double the Michigan state tax on all tobacco products. (This is except for the already in place $2 per pack manufactured cigarette tax.) These new taxes are being implemented to help balance next years dismal state budget. Once the Legislature approves this, the tobacco items tax will jump from 32% to 64% on wholesale prices.

In Michigan, the folks that roll their own will be getting hit the hardest. With the combined Federal and state tax, the average price of popular rolling tobacco will go up from about $20 per one pound bag to $70 per bag. This will change the total price for rolling your own quite substantially. The current cost for rolling your own is about $1 per pack when buying a one pound bag of tobacco. Once all the taxes go into effect, the price will jump to about $3 per pack.

So what happens now is still unclear. The tobacco shop retailers in Michigan are expecting a large decline in business. Rolling tobacco use has been picking up steadily over the past several years due to the past cigarette tax hikes. Another tax hike will probably increase the amount of traffic to neighboring states where the cigarette taxes are lower and the prices per pack make it economical to stock up and bring them back. Smuggling cigarettes increased substantially with the last large tax hike, and is expected to do the same this time around. Also, an expensive boost to people's willpower should cause a lot of folks to drop the habit once and for all. With the cost of a pack of cigarettes going to about $6 per pack in Michigan, time will tell if a 50% savings with roll your own supplies will bring in as much revenue as 80% savings did. Or will so many people quit that the increased tax revenues are offset by those dropping the habit completely? We should know sometime next year.

Thanks for reading.

Published by Paul Wilson

Hey there,I love to travel, I live in Michigan , and have stayed in the US Virgin Islands, Costa Rica, online scams are a favorite pastime. Enjoying life, no matter what comes my way. Now living in Nevada... View profile

New Federal Tobacco Tax Means Michigan Smokers Getting Double Taxed

How Michigan Smokers Will Be Affected by a Double Tax on Tobacco

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