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Federal Excise Taxes on Tobacco Products: Rates and Revenues, April 28, 2005 1 (April 28, 2005)

handle is hein.tera/crstax0171 and id is 1 raw text is: Order Code RS20343 Updated April 28, 2005 CRS Report for Congress Received through the CRS Web Federal Excise Taxes on Tobacco Products: Rates and Revenues Louis Alan Talley Specialist in Taxation Government and Finance Division Summary This report examines increases in excise tax rates on tobacco products contained in the Balanced Budget Act of 1997 (P.L. 105-33). Under that act, the increased rates on tobacco products became effective in two stages. The first scheduled increase in rates occurred on January 1, 2000, while the second increase in rates occurred two years later on January 1, 2002. The increased rates apply to all tobacco products. In addition, the act included a new excise tax on roll-your-own tobacco which became effective January 1, 2000. Also included in the act were expanded compliance measures designed to ensure collections of tobacco excise tax monies. As a result of payments made by tobacco companies under the Master Settlement Agreement and the resulting increase in the cost of tobacco products, tobacco consumption declined. Thus, projected federal tobacco revenues have declined somewhat when compared to prior revenue estimates made at the time of the Balanced Budget Act's passage. This report will be updated as legislative developments warrant. Tax Rates The federal tax rate on cigarettes remained unchanged at 8 cents per pack from 1951 to 1982. Since 1982 the rate has been increased by three federal tax acts. The rate was increased to 16 cents per pack as part of the Tax Equity and Fiscal Responsibility Act of 1982 (P.L. 97-248). In the General Explanation of the Revenue Provisions of the Tax Equity and Fiscal Responsibility Act of1982, the Joint Committee on Taxation indicated that the reason for this increase was that inflation had caused the effective level of the tax to decline by more than 70% in constant dollars because the tax was imposed as a set For a more detailed legislative history, see CRS Report 94-474, Federal Excise Taxes on Tobacco Products: A Summary ofPresent Law and a Legislative History, by Thomas B. Ripy and Mildred C. Washington. Congressional Research Service oe The Library of Congress

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