Cigarette Taxes - Where Does the Money Really Go - Essay Example

Cigarette Taxes - Where Does the Money Really Go Introduction Cigarettes are taxed exceedingly in the United States, and excise taxes on cigarettes are a lot higher than excise taxes on other age-restricted products. In most states, there is a large gap involving the level of excise taxes paid on beer and wine compared to the intensity of excise taxes on cigarettes. Smokers generate about 22.3% of the U.S. adult population, and they are by now paying more than their reasonable share of the tax load. The government makes more money off cigarettes per minute than the normal family makes in a year. Federal taxes on cigarettes have augmented 62.5% since 2000. (Chaloupka, 45-57) Yet suggestion to more increase cigarette taxes are prepared each year typically to fund new or delayed government programs not linked to tobacco control. Raising cigarette taxes are responsible for the insincerity of "politically correct" tax outline of adult smokers. The projected weighted average state excise tax on cigarettes as of December 2004 was 76 cents per packet, and the federal government toll an additional 39 cents per packet. Federal, state and public excise taxes on cigarettes for the financial year ending June 2003 was calculated to be more than $19 billion. (Jonathan, 2005) This is not a reasonable way to tax cigarettes or the adults who smoke them. It's time to end the insincerity of tobacco excise taxes and broaden the tax burden more moderately. During the period 1998-2005, federal, state and local governments received approximately $218 BILLION in excise tax and (MSA)/state expenses. Since 2001, 41 states have raised tobacco taxes, and suggestion to increase the federal excise tax on cigarettes, at present 39 cents per packet, are regularly being considered by Congress. Since 2000, federal taxes on a packet of cigarettes have rised to 62.5%. Since 1998, the average price of a packet of cigarettes has augmented by 94% (from $2.04 to $3.95). Since 1999, government tobacco returns has enlarged more than 61%. (Chaloupka, 45-57) Cigarette tax increase suggestion is made repeatedly, generally to fund new or prolonged government programs unrelated to tobacco control. Some supporters of increasing the tax have described it as "voluntary," or have said they are not actually concerned in the tax revenue the increase might produce. Despite these description, further increasing excise taxes on cigarettes totals to "politically acceptable" tax profiling of adult smokers. Generous funding for tobacco control and youth smoking deterrence is by now being presented by the Master Settlement Agreement (MSA). The MSA affords industry funding particularly allocated for youth anti-smoking education programs and a national health research foundation. But is the MSA money being used sensibly By the end of fiscal year 2005, only three states had congregate or go beyond minimum strategy, as suggested by the Centers for Disease Control (CDC), for expenditure on tobacco control. According to 2005 U.S. General Accounting Office (GAO) facts, the 46 states that are gathering to the MSA spent less than five% of MSA taxes on tobacco control. Thirty-three of the 46 states depleted anywhere between zero and 10% of MSA duty on tobacco control. Slightly than the youth-smoking prevention and future Medicaid settlement for which it was proposed, MSA money is being spent on all from golf carts to bridges, roads and parks to state shortage decline, and, of course, on more administration.(Robert & Stephen, 78-84) Cigarette Excise Taxes and Funding Through Master Settlement Agreement (MSA) funds and levies from other related settlements, state governments have extraordinary funds on hand to them to reduce youth smoking. Future annual payments, stand upon inflation and cigarette sales, will persist in infinity. Although the MSA frequently state that "performance of tobacco-related public health measures," each state chooses how its MSA funds are spent. Tobacco companies do not have any contribution into how the states spend their resolution funds. So, where have the cigarette excise taxes gone When the MSA was marked in 1998, the states held press convention announcing that they would spend the funds on smoking education, cessation and explore ways to control smoking. State attorneys general spoke expressively about caring youth and advancing public health. For instance, Washington Attorney General Christine Gregoire said: "Washington State's earnings from the tobacco industry agreement should be spent on public health problem or the reliability of the historic agreement will be desecrated." (Robert & Stephen, 78-84) Montana Attorney General Joe Mazurek stated: "This accord provides important benefits to Montana and to Montanans. It will resolve the state's harm claims against big tobacco. It will afford useful tools to inform the public predominantly young people regarding the dangers of tobacco use, and to meet further health-related needs." (Gruber, 1959-1987) Conversely, time has proven these assurances to be part of a typical "bait-and-switch" operation. As an alternative of using the money for its proposed purpose, the states have wasted billions of dollars on "pet schemes," such as golf courses and horse-breeding farms, infrastructure and overpass, and state budget shortage reductions items entirely discrete to the stated rationale of the settlement funds. In fact, states have spent a huge fraction of MSA funds on projects entirely not related to youth-smoking prevention and tobacco control. Projects for which MSA money have previously been spent include: Dump trucks and a course irrigation system, and a innovative county prison in New York; Broadband-cable system in Virginia; Psychiatric care for prisoners in New Jersey; Boot camps for adolescent criminal, substitute schools, and metal detectors and supervision cameras for schools in Alabama; (Gruber, 1959-1987) Advancing public television stations with DVD equipment in Nevada; Harbor reconstruction and museum extension in Alaska; Water and sewer development in South Carolina; Pasture and weather screening for a thoroughbred association in Kentucky; College research in Michigan; City parks and the acquisition of new land in California; A senior national prescription drug program and property tax discount in Illinois; Medicaid dental services in Maine; Maintenance expenses for the Carolina Horse Park, motor vehicle driver training, pine straw farming study and equipment improvement at a knitting plant in North Carolina; (Robert & Stephen, 78-84) A People's Trust Fund, which will create interest income that can be spent at the legislature's judgment, in South Dakota; Assistance in balancing the financial plan, which used four years of MSA money, in Tennessee; Rural monetary development in Georgia; Tax reduction in several states; and, Compensate a revenue deficit in Wisconsin. (Municipal bonds, supported by future MSA payments, were sold to do so.) (Robert & Stephen, 78-84) The U.S. Centers for Disease Control and Prevention (CDC) suggested that roughly 20-to-25% of the MSA payments go to smoking prevention programs. Since financial year 2000, states have expected $53 billion in MSA payments and securitized earnings according to the GAO. (Gruber, 1959-1987) On the other hand, only four states had accomplished or go beyond the CDC's minimum-funding approval for tobacco-control programs. In its investigation of financial year 2006 MSA payment expenditures estimated since the MSA was signed, the Campaign for Tobacco-Free Kids (CTFK) found: Only four states supported tobacco prevention programs at levels that meet the CDC's minimum approval. Only 15 states (together with the four above) have dedicated 50% or more of the least amount of funding level suggested by CDC. Thity-five states and the District of Columbia are utilizing less than half the CDC's least amount of MSA finances for tobacco prevention programs or offering no funding at all. An April 2006 GAO report found that states utilized approximately 4.7% of the more than $5.8 billion in MSA expenses and securitized earnings in financial year 2005 for new or prolonged tobacco-control programs. The GAO also noted that 32 states spent a smaller amount which is than 10% of MSA taxes on tobacco control and some spent not anything at all. It is expected that states should take benefit of having extraordinary funds existing to combat youth smoking, and that a major portion of the states' expenditure should be spent to put off tobacco use among under aged. (Robert & Stephen, 78-84) The states' greed burdens adults who desire to smoke. It's not the tobacco companies that are causative to the governments' taxes; settlement payments and cigarette taxes are part of the rising price of cigarettes. Conclusion Tobacco settlement funds have resulted in record increases in the price of a packet of cigarettes. In 2005, government gains of settlement payments and tax revenues were measured for more than half of the price of a packet of cigarettes. From 1998-2005, the government received more than $218 billion in settlement funds and cigarette taxes; however, many states have endorsed or are recommending even higher cigarette excise taxes. By now, the government generates more money off cigarettes per minute than the average family makes in a year. And, government representatives continue to look forward to the 22% of the U.S. adult population that smokes to pay even more for cigarettes to cover up state budget shortfalls. Works Cited Chaloupka, F. J., and Warner, K. E.. "The Economics of Smoking." In Handbook of Health Economics, eds. A. J. Culyer and J. P. Newhouse. Amsterdam: Elsevier Science, (2000); 45-57 Robert L. Rabin & Stephen D. Sugarman, Regulating Tobacco Oxford University Press, USA (2001), 78-84 Gruber, Jonathan and Botond Koszegi "Tax Incidence When Individuals are Time-Inconsistent: The Case of Cigarette Excise Taxes." Journal of Public Economics, (2004). 88, 1959-1987. Jonathan H. Gruber and Sendhil Mullainathan "Do Cigarette Taxes Make Smokers Happier", Advances in Economic Analysis & Policy: (2005) Vol. 5: No. 1, Article 4. Retrieved from www.econ.yale.edu/seminars/labor/lap02/Gruber-020913.pdf on November 8, 2006 Read More