About | HeinOnline Law Journal Library | HeinOnline Law Journal Library | HeinOnline
LOG IN
LOG IN

1 J. D. Foster, My Favorite Tax Hike, by G.O. Party 1 (1998)

handle is hein.taxfoundation/myikeparxz0001 and id is 1 raw text is: TAX FOUND) April 1998, No. 8 nlON My Favorite Tax Hike, by G.O. Party A Republican Congress is working hard to pass a huge tax increase, and nobody seems to notice. President Clinton and his Democratic congressional allies strongly support the tax increase, even though it falls disproportion- ately on the poor and middle-income taxpay- ers, and nobody seems to notice. Even in Washington, this isn't business as usual. What are these people smoking? Tobacco, of course. The central element of the tobacco settlement working its way through the Congress is $65 billion in addi- The s'mPiefdifatj45f b0 ignored is 1/bhat i~oe $65% Iftanqo i!'cg~a fr-derai revenues is a icr incretpse4 S smokers,9 no! on #,'he tdsr..Wa curious, bowevet, is that 4'his &.,tx mrrease violates basic Dlemocrani- and.4cwti~a Principles, and (tveinec Iete ic sdoe1/n. tional federal revenues over the next five years. It is still unclear whether the tobacco companies will make these payments as part of a contractual settlement with the federal government, or whether Congress will raise the federal cigarette excise. Politically, the difference may be important. Economically, the difference is meaningless - tobacco prices will increase. Indeed, higher tobacco prices are a basic goal of the government in reaching the settlement. Anti-tobacco forces want prices to increase to discourage tobacco use. Perhaps because the tobacco industry negotiated the $65 billion figure, or perhaps because the payments may be part of a con- tractual agreement, there is a sense even among Republicans that this tax would be paid by Big Tobacco. The implication, of course, is that a tax increase on big tobacco compa- nies would be okay. What nonsense! There is nothing unique about the tobacco industry that exempts it from the basic rule that businesses don't pay taxes; people pay taxes. The simple fact that seems to be roundly ignored is that the $65 billion in additional federal revenues is a tax increase on smokers, not on the industry. As the companies in- volved have negotiated this amount, there is little point in questioning the propriety of raising this sort of tax revenue. What is curious, however, is that this tax increase violates basic Democratic and Republican principles, and yet neither side is objecting. The Republicans proclaim themselves the party of lower taxes and smaller government. Indeed, a Republican consensus is developing around a $30 billion income tax cut over the next five years. A big question is how to pay for this income tax cut. Senator Pete Domenici (R-NM), Chairman of the Senate Budget Committee, has indicated that this year's budget resolution is not going to have tax cuts in it that use the Social Security surplus or the cigarette tax - the cigarette settlement. Apparently, Senator Domenici doesn't want to call this revenue a tax. As the old saw goes, however, if it looks like a duck and it quacks like a duck, then it's probably a duck. Tobacco settlement revenues would come from higher cigarette prices, consumers would pay the higher prices, and the revenues would flow to the Treasury. It's a tax. Combined with the tobacco settlement taxes, the Republicans' $30 billion income tax cut nets out to $35 billion tax hike. Appar- ently alone among Republican leaders Senator By Dr. J.D. Foster Executive Director and Chief Economist Tax Foundation

What Is HeinOnline?

HeinOnline is a subscription-based resource containing thousands of academic and legal journals from inception; complete coverage of government documents such as U.S. Statutes at Large, U.S. Code, Federal Register, Code of Federal Regulations, U.S. Reports, and much more. Documents are image-based, fully searchable PDFs with the authority of print combined with the accessibility of a user-friendly and powerful database. For more information, request a quote or trial for your organization below.



Contact us for annual subscription options:

Contact Us

Already a HeinOnline Subscriber?

Log In

profiles profiles most