senate goes to vote on tobacco tax increase

R.J. Reynolds sets up Website opposing bill.

Today, the U.S. Senate Finance Committee is scheduled to hold a vote over the proposed 61-cents-per-pack increase on cigarettes and the possibility of a 156% increase on other tobacco products, such as cigars, pipe tobacco and smokeless products. The new tax, introduced by Sen. Gordon Smith (R-Ore.), is being implemented to raise money for the

State Children’s Health Insurance Plan (SCHIP). SCHIP provides health insurance to more than six million children from poverty stricken families.

With the money pulled in from the new tax, SCHIP will undergo a $35 billion expansion over the next five years. The expansion would be completely funded by the tax, which when added to the current 39 cents, would lead to a $1 federal tax per pack.

Opposing the tax is tobacco manufacturer R.J. Reynolds, which recently launched the site www.nocigtax.com. According to Reynolds, the tax would unleash a downward spiral in the industry, affecting everyone from customers to retailers to tobacco farmers.

The company argues that smokers, already burdened by high taxes, would be swayed away from cigarettes. C-stores, in particular, would be severely affected by this volume decrease, which Reynolds analysts predict could be as high as 5% to 6%. The tobacco industry would also be hurt, with Reynolds predicting that more than 12,000 jobs in the industry would be lost.

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