Joe Biden was prominent on the campaign trail in 2020. He repeatedly promised that no American earning less than $400,000 per year would see even a “single penny” of increased federal taxes. Biden even assured the middle class would see an actual tax cut and that his big-spending “Build Back Better” programs would be entirely paid by making the rich pay a “fair share.”
Like all campaign promises, that one had an expiration date. As far as increased taxes on Americans of every earning level are concerned, that one expired quickly.
The Biden administration and the Democrats want to raise taxes on tobacco products and create new taxes on vaping products to raise around $100 billion in new federal revenue over the next ten years.
Smoking and vaping taxes hit the poorest Americans the hardest. Of all adults in the U.S., about 14 percent use tobacco. Of adults bringing in less than $35,000 per year, around 21 percent are tobacco consumers.
Forced to deal in some way with objective reality, Democrats have been creative in arguing that the new tobacco tax proposal does not break Biden’s tax promises. An administration source told the Washington Post that higher tobacco taxes would not affect their incomes because smoking is not a “required cost” for low-income earners.
The source also said that the administration was considering the need to discourage tobacco and vaping use, which harm public health.
The proposed taxes are not insignificant. The plan would double the excise tax on cigarettes and bring taxes on every other tobacco product to the same level as cigarettes. The impact would be a 2,000 percent tax increase on chewing tobacco. An American who makes $35,000 per year and smokes one pack of cigarettes per day would spend about 5.2 percent of their annual income just on the tax on the tobacco they buy.
As a revenue-producing measure, the proposed taxes would fail to deliver. Like all sin taxes, the primary purpose of the tax is to disincentivize the consumption of the taxed product. The more successful the tax is in achieving that goal, the less revenue it will produce. Higher tobacco taxes also have a proven track record of creating and sustaining black markets for smugglers and other criminal suppliers.
It appears that the national political cost of tobacco taxes is acceptable to Biden and the Democrats. Since the states that produce the most tobacco products are usually solidly red in national elections, imposing a tax that hits those states more heavily is likely more of a feature than a bug to the “progressives.”