Rolling Back the Tobacco Tax

Hospitals & Asylums

Rolling Back the Tobacco Tax of 2009 Act HA-10-10-10

An Act to Forgive Smokers of Small Cigars and Roll-your-own Tobacco for the Excessive Excise Tax of April 1, 2009

Be it enacted by the Alcohol and Tobacco Tax and Trade Bureau

ttbtobacco@ttb.treas.gov

AN INTERNAL REVENUE BILL OF THE SECRETARY

Whereas small cigars and roll-your-own tobacco are preferred by the 31 percent of tobacco smokers who are poor;

And the Children’s Health Insurance Program Reauthorization Act of 2009 (CHIPRA, Public Law 111–3) Title VII Revenue Provisions Section 701 Increase in Excise Tax Rate on Tobacco Products, imposed a 2,653 percent tax increase on small cigars and 2,159 percent tax increase on roll-your-own tobacco;

And small cigarettes, large cigarettes, chewing tobacco, snuff, pipe tobacco, cigarette papers and cigarette tubes were subjected to a more reasonable 158 percent increase and large cigars a 155% increase and no floor tax.

Therefore this cruel and unusual excise tax is excessive;

And consumers of small cigars and roll-your-own are due the equal protection of the clause 26USC(F)(65)(B) §6423(c);

To the full extent of their loss;

Calculated by dividing the excessive tax hike on small cigars and hand-rolling tobacco by the 158 percent, multiplying by the two years the excessive rate was in effect and rounding to the nearest whole integer, wherefore;

(a) Small Cigars – Section 5701(a) of the Internal Revenue Code of 1986 as codified at 27CFR(I)(40)(C)§40.21 is amended by striking $50.33 and inserting $1.828 with a footnote that states, “refunded at this tax rate for excessive CHIPRA hike of 2009-2010 until April 1, 2045”.

(g) Roll-Your-Own Tobacco- Section 5701(g) of the Internal Revenue Code of 1986 as codified at 27CFR(I)(40)(C)§40.25a is amended by striking $24.78 and inserting $1.0969 with a footnote that states, “refunded at this rate for excessive CHIPRA hike of 2009-2010 until April 1, 2038”.

And 100 percent of the proceeds of the Attorney Generals’ Master Tobacco Settlement shall be deposited in the Federal, State Children’s Health Insurance Program (S-CHIP) account.

States, particularly those increasing rates 2009-2010, shall grant roll-your own and small cigar smokers refunds.

Taxpayers shall not be eligible for the rolled back to the March 31, 2009 tax rate of 2008 for our traditionally cheapest rolling tobacco and small cigars, until they can prove they have reduced wholesale and retail prices to what they were before the tax increase, allowing for a 3 percent inflation rate and any new state excise tax increases incurred 2009-2010.

Uniform Surgeon General Warning Labels shall read – Nicotine withdrawal is a mental illness. Excessive smoking and addiction may irritate emphysema, cancer and heart disease and complicate pregnancy.

The Spirit clearly says in the latter times some will abandon the faith and follow deceiving spirits and things taught by demons. Such teachings come through hypocritical liars, whose consciences have been seared as with a hot iron. They forbid people to marry and order them to abstain from certain foods, which God created to be received with thanksgiving by those who believe and who know the truth. For everything God created is good, and nothing is to be rejected if it is received with thanksgiving, because it is consecrated by the word of God and prayer (1 Timothy 4:1-5)

Report

Part 1 Venue for a Tobacco Excise Tax Refund

Part 2 Tobacco Tax of 2009 is Excessive

Part 3 State Excise Taxes after 2008 Jeopardized

Part 4 Epidemiologic Theory Targeting Smokers

Part 5 Socio-Economic Issues: Segregation, Addiction and Taxes are Needless

Part 6 Colonial Legislation of the Tobacco Trade

Part 7 Development of the Federal Regulation and Taxation of Tobacco

Part 8 Concluding Remarks

Bibliography

Tab1e 1 Effect of the CHIPRA on Tobacco Tax Rates

Table 2 Enacted Cigarette Excise Tax Rates per 20 Pack (in $) by State, 2008 and 2010

Map 3 Enacted State Cigarette Tax Rates July 1, 2010

Chart 4 Trends in Current Cigarette Smoking Among High School Students and Adults in the US 1965-2009

Chart 5 US Production, Exports and Domestic Consumption of Cigarettes 1990-2007

Table 6 Prevalence of Smoking and Smoke-free Workplaces, Restaurants, Bars and Homes, by State, 2010

Table 7 Tobacco Tax as % of Price and % of Total Government Revenues, selected countries, circa 1990

Table 8 American Tobacco Exported to England 1615-1695 and 1772

Table 9 Historical Federal Tobacco Tax Revenues 1863-1970

Chart 10 Trends in State and Federal Cigarette Tax and Retail Price, US, 1970-2009

Part 1 Venue for a Tobacco Excise Tax Refund

Thus concludes the rational basis portion of the test. Judging others, do not judge or others will judge you (Matthew 7:12). Judging the numbers one cannot fail to find that there is a legitimate government duty to refund the small cigar and rolling tobacco smoking ultimate bearers of the excessive burden of excise taxation without subjecting anybody to any sort of investigatory judgment. The compelling interest is that although nicotine withdrawal is a diagnosable mental illness and nicotine addiction the leading excuse for death by doctors who can’t buy a poor man a tent, sleeping bag, clean clothes and three square meals of fruit, grain and/or vegetables for 16% of the GDP. It is customary that Applications of 26 USC(F)(65)(B)§6423(c), as Amended, to Refund or Credit of Tax on Tobacco Products, and Cigarette Papers and Tubes at Subpart A of Part 46 of Chapter 1 pertaining to the Alcohol and Tobacco Tax and Trade Bureau, Department of the Treasury are directed under 27CFR(I)(46)(A)§46.7 for the Execution and filing of claim.

Claims must be executed on Form 2635 (5620.8) in accordance with instructions for the form. The claim shall set forth each ground upon which is made in sufficient detail to apprise the appropriate TTB officer of the exact basis therefor. Allegations pertaining to the bearing of the ultimate burden relate to additional conditions which must be established for a claim to be allowed and are not in themselves legal grounds for allowance of a claim. There shall also be attached to the form and made a part of the claim the supporting data required by Sec. 46.8. All evidence relied upon in support of such claim shall be clearly set forth and submitted with the claim. Under 27CFR(I)(46)(A)§46.8 Data to be shown in claims, must set forth or contain the following:

(a) A statement that the claimant paid the amount claimed as a “tax'' as defined in this subpart.

(b) Full identification (by specific reference to the form number, the date of filing, the place of filing, and the amount paid on the basis of the particular form or return) of the tax forms or returns covering the payments for which refund or credit is claimed.

(c) The written consent of the owner to allow the refund or credit to the claimant (where the owner of the article on which the tax was paid has furnished the claimant the amount claimed for the purpose of paying the tax).

(d) If the claimant or the owner, as the case may be, has neither sold nor contracted to sell the articles involved in the claim, a statement that the claimant or the owner, as the case may be, agrees not to shift, directly or indirectly in any manner whatsoever, the burden of the tax to any other person.

(e) If the claim is for refund of a floor stocks tax, or of an amount resulting from an increase in rate of tax applicable to an article, a statement as to whether the price of the article was increased on or following the effective date of such floor stocks tax or rate increase, and, if so, the date of the increase, together with full information as to the amount of such price increase.

f) Specific evidence (such as relevant records, invoices, or other documents, or affidavits of individuals having personal knowledge of pertinent facts) which will satisfactorily establish the conditions of allowance set forth in Sec. 46.5.

Title VII of CHIPRA does allow the Secretary of Treasury a Show Cause Hearing regarding the suspension and revocation of the CHIPRA of 2009 permit for the Alcohol and Tobacco Tax and Trade Bureau (ATTTB) to tax small cigars and roll-your-own tobacco under Section 702(b)(1) whereas Congress and the ATTTB has not in good faith complied with this chapter…involving intent to defraud the weakest willed addicts of small cigars and hand-rolling tobacco. ATTTB has violated the conditions of such permit to tax by failing to credit the CHIPRA amendments with a percent figure and refund the excessively burdened the money that was extorted. ATTTB failed to disclose the material information required to alert the Congress and the public that the percentage change in the tax on small cigars and rolling tobacco preferred by the poor was 13 times and 17 times greater than the increase on all other tobacco products. Having been so repressive to the poor ATTTB has failed to maintain his premises in such manner as to protect the revenue. There is no denying that CHIPRA is a regressive tax. By reason of previous legal proceedings involving the failure of the legislature to appropriate 100 percent of the Attorney General Master Tobacco Settlement for the complete satisfaction of federal and State Child Health Insurance Program (S-CHIP), the Secretary of the Treasury must suspend 100 percent of the money concealed by the Attorney General Master Tobacco Settlement, revoke the excessive provisions of CHIPRA of 2009 to reimburse the dollar loss and pay for all medically necessary child immunizations with the proceeds of the Master Settlement.

Part 2 The CHIPRA Tobacco Tax of 2009 is Excessive

The Children’s Health Insurance Program Reauthorization Act of 2009 (CHIPRA, Public Law 111–3), vetoed by President Bush, was signed into law on February 4, 2009 by President Barack Obama and a number of new and amended forms and instructions are available from the Alcohol and Tobacco Tax and Trade Bureau of the Treasury. CHIPRA increased the Federal excise tax on all tobacco products and cigarette papers and cigarette tubes, effective April 1, 2009. In addition, CHIPRA imposed a floor stocks tax on all tobacco products (except large cigars), cigarette papers and cigarette tubes held for sale on April 1, 2009. A floor stocks tax is a one-time excise tax placed on a commodity undergoing a tax increase. The amount of the floor stocks tax is equal to the difference between the new tax rate and the one just previous to it. The definition of roll-your-own tobacco at 26 U.S.C. 5702(o), as amended by the Act, added the words, “or cigars, or for use as wrappers thereof” to the end of the definition. As a result, existing permit requirements applicable to manufacturers and importers of roll-your-own tobacco will now extend to manufacturers and importers of tobacco for making cigars and tobacco for use as wrappers of cigarettes and cigars. For those segregated from all smoke-free workplaces, restaurants and bars, living in fear of the Surgeon General, it is difficult to speakeasy. Here are the experiences of three habitual smokers of roll-your own tobacco, living below the poverty line, and smoking pipe tobacco to save money, in regards to the impact of the tobacco tax increase of 2009 -

Smoker A: Moved to five States with a broken heart in pursuit of a rheumless room, “The price of a pack of Drum rolling tobacco, that lasts three days, went up from $3.04 in 2006 to $11-15 a pack, from $30 a month to $100, from 5 percent of disability benefits to 20 or 40 percent after rent, and there was no Social Security cost of living increase, although inflation in this staple commodity was 300 percent”.

Smoker B: Had prostate surgery in summer of 2009 and fever the day before last, “$2 increase on American Spirit from $5 to $7 pre-rolled, $3 to $10 for rolling tobacco”.

Smoker C: Already learned the health theology lesson about can-sir a decade ago, “The price of tobacco leaf without chemical additives went up from $24 to $100 a pound”.

Tab1e 1 Effect of the CHIPRA on Tobacco Tax Rates

Product	Tax Rate effective March 31, 2009	Tax Rate effective April 1, 2009	Floor Stocks Tax Rate (difference between the rates)	% Change
Small Cigarettes - Class A (Weigh 3 lbs. or less per 1,000)	$19.50 per 1,000 equivalent to: $3.90 per carton $0.39 per pack	$50.33 per 1,000 equivalent to: $10.066 per carton $1.0066 per pack	$30.83 per 1,000 equivalent to: $6.166 per carton $0.6166 per pack	158%
Large Cigarettes - Class B (Weigh more than 3 lbs. per 1,000)	$40.95 per 1,000	$105.69 per 1,000	$64.74 per 1,000	158%
Small Cigars (Weigh 3 lbs. or less per 1,000)	$1.828 per 1,000	$50.33 per 1,000	$48.502 per 1,000	2,653%
Large Cigars (Weigh more than 3 lbs. per 1,000)	20.719% of sales price but not to exceed $48.75 per 1,000	52.75% of sales price but not to exceed $0.4026 per cigar (or $402.60 per 1,000)	NOT PART OF FLOOR STOCKS TAX	155%
Chewing Tobacco	$0.195 per pound	$0.5033 per pound	$0.3083 per pound	158%
Snuff	$0.585 per pound	$1.51 per pound	$0.925 per pound	158%
Pipe tobacco	$1.0969 per pound	$2.8311 per pound	$1.7342 per pound	158%
Roll-your-own tobacco	$1.0969 per pound	$24.78 per pound	$23.6831 per pound	2,159%
Cigarette papers	$0.0122 per 50	$0.0315 per 50	$0.0193 per 50	158%
Cigarette tubes	$0.0244 per 50	$0.0630 per 50	$0.0386 per 50	158%

Source: % Change is calculated by dividing the Floor Tax, or difference between the New Rate and Old Rate, by the Old Rate as given by the Alcohol and Tobacco Tax and Trade Bureau of the Treasury

To put it bluntly, illegally and without authority, CHIPRA wrongfully assessed and erroneously collected a tobacco tax, for which the bearers of the ultimate burden are due full credit or refund under 26USC(F)(65)(B) §6423(c). Many states have joined in the tyrannical repression to regressively increase their excise taxes on tobacco products. The end result has been record budget deficits, voter dissatisfaction and rumors that the peculiar nature of addiction in regards to the stress of the tobacco tax and failing economy has driven more people to smoke tobacco despite the higher prices. The technical flaw in the CHIPRA that gives ground for the rational basis claim that the tax was excessive, involves the 2,653 percent tax increase on small cigars and 2,159 percent tax increase on roll-your-own tobacco while small cigarettes, large cigarettes, chewing tobacco, snuff, pipe tobacco, cigarette papers and cigarette tubes were subjected to a more reasonable 158 percent increase and large cigars a 155 percent increase and no floor tax. We shall not at this time debate whether the 158 percent increase in taxes was excessive, although in retrospect it does seem quite steep, it did raise the tobacco tax on pre-rolled cigarettes to a square dollar. There is however no denying that the greater than 2,000 percent increases in the tobacco tax on small cigars (2,653) and roll-your-own tobacco (2,159), traditionally the preference of poor tobacco addicts, conflicts with the excessive fines prohibited by the Eighth Amendment and equal protection clause of the Fourteenth Amendment to the derogation of Article I Section 8 Clause 1 of the United States Constitution that states, The Congress shall have the power to lay and collect taxes, duties, imposts and excises, to pay the debts and provide for the common defense and general welfare of the United States; but all Duties, Imposts and Excises shall be uniform throughout the United States.

To restore conditions to where they were before the passage of the unconstitutional, CHIPRA, sufficient credit or refund must be granted to the consumer so that it would be as if the unconstitutional act had never occurred. The most logical solution is for the tax increase on small cigars and roll-your-own tobacco imposed by CHIPRA to be completely suspended until all illicit revenues have been refunded. Therefore if this legitimately needed amendment became effective April 1, 2011 the federal tax on small cigars would return to $1.828 per 1,000 and the federal tax on roll-your-own would return to $1.0969 per pound. To calculate how long this tax refuge is due one must divide the tax rate by 158 percent, multiply by the two years the excessive rate was in effect and round to the nearest whole integer - 34 years for small cigars and 27 years for roll-your-own. By this time the tobacco tax system is probably going to be changed to one that automatically accounts for inflation so it is not necessary to propose any automatic 158 percent increase at the conclusion of this tax refuge. In order to give the bearers of the ultimate burden, the consumers, credit or refund for the excessive tax they paid on small cigars and roll-your-own tobacco since April 1, 2009 the Treasury must require the taxpayer, wholesalers and retailers, of these products, to reduce their prices to within 6 percent, allowing for normal inflation of 3 percent annually, of what it was on March 31, 2009, to be eligible for the tobacco tax refuge for small cigars and roll-your-own tobacco products running from April 1, 2011.

Part 3 State Excise Taxes after 2008 Jeopardized

To ensure the prices paid by smokers of small cigars and rolling tobacco are within 3 percent annually, of what they were before March 31, 2009, to allow for normal levels of inflation and provide tax relief for the 31 percent of American smokers who are poor, States should also refund taxes on small cigars and roll-your-own tobacco incurred in 2009 and 2010 to the extent they were excessive. After a number of tax increases in the 1980s and early 1990s (Chaloupka et ‘00) states did not increase cigarette taxes much in the late 1990s and early 2000s to prevent double jeopardy with the $249 billion State Attorney General’s Master Tobacco Settlement. States should have been equally considerate in regards to the prevention of double jeopardy with federal tobacco excise tax but the excessive tax was too inconsiderate. Article I Section 10 Clause 2 of the United States Constitution whereby no State shall, without the consent of Congress, lay any Imposts or Duties…except what may be absolutely necessary for executing its inspection laws. Currently, about $25 billion is available to states from cigarette taxes, and about $700 million of that is spent on smoking prevention (Maugh ’10). Cigarette taxes are also associated with smoking rates. It's not clear whether taxes discourage smoking or whether states with fewer smokers are more likely to pass high cigarette taxes. In states where smoking was well above average, the average state cigarette tax was $0.66 a pack. In average states, it was $1.59, and in below-average states, it was $2.02. The only exceptions to the rule were the well-below average states for smoking, Utah and California, where the average cigarette tax is on the low end — $0.78. Utah's 13 percent smoking rate could be explained by high rates of Mormonism, which forbids smoking, Gallup suggested. The poll can't explain California's 16 percent rate (Live Science ’10).

No elaborate licensing or state monopoly system, such as those designed to control commerce in alcohol, has ever been imposed on tobacco. In 1921, Iowa became the first state to cash in on the crop directly by taxing cigarettes. By 1930, 11 other states had adopted the revenue measure. In 1950, 40 states and the District of Columbia taxed cigarettes. The rates ranged from one cent to five cents for a pack of 20 except in Louisiana which levied an eight cent tax on cigarettes. In 1958, Montana imposed an equivalent rate. Between 1950 and 1962, 43 of the 47 taxing states raised their rates at least once. The frequent increase in cigarette taxes narrowed the gap between the rates in low tax states and higher tax states. In the 12-year period, the median tax rate rose from three cents to six cents per pack; the maximum rate remained at eight cents in Texas, Louisiana, Montana and New Mexico, in contrast to the two cent rate in the District of Columbia and Kentucky. The four leading states in terms of both production and relative dependence on the crop have been North Carolina, South Carolina, Kentucky and Virginia, the latter two being the only states in the history of cigarette taxation to decrease their taxes; the reduction was only .5 cent (from three cents to two and a half cents) in 1960 and 1961, respectively. By 1966, Oregon became the 49th state to impose a tax on cigarettes; the rate was four cents per pack. Finally, in 1969 North Carolina imposed a cigarette tax-two cents. The cigarette excise taxes continued to increase during the sixties. By 1970, the taxes ranged from North Carolina's two cents to Pennsylvania's 18 cents for a weighted average of 10.7 cents. Twenty nine states levied taxes of 10 cents or more per pack. Local governments superimposed further excise taxes on the state taxes, ranging from one cent to 10 cents per package. By mid-1971, the range had widened further Connecticut at 21 cents and North Carolina at two cents, the weighted average state tax being 11.1 cents (McGrew ‘79).

Table 2 Enacted Cigarette Excise Tax Rates per 20 Pack (in $) by State or Territory
Includes Increases Effective 2008 and July 1, 2010

State	Rate 2008	Rate 2010	States	Rate 2008	Rate 2010	State	Rate 2008	Rate 2010	State	Rate 2008	Rate 2010
Alabama	0.425	0.425	Illinois	0.98	0.98	Montana	1.70	1.70	Puerto Rico	N/A	2.23
Alaska	2.00	2.00	Indiana	0.995	0.995	Nebraska	0.64	0.64	Rhode Island	2.46	3.46
Arizona	2.00	2.00	Iowa	1.36	1.36	Nevada	0.80	0.80	SouthCarolina (0.07 till July1, ‘10)	0.07	0.57
Arkansas	0.59	1.15	Kansas	0.79	0.79	New Hampshire	1.08	1.78	South Dakota	1.53	1.53
California	0.87	0.87	Kentucky	0.30	0.60	New Jersey	2.575	2.70	Tennessee	0.62	0.62
Colorado	0.84	0.84	Louisiana	0.36	0.36	New Mexico (0.91 till July 1, ‘10)	0.91	1.66	Texas	1.41	1.41
Connecticut	2.00	3.00	Maine	2.00	2.00	NewYork (2.75 till July 1, ‘10)	1.50	4.35	Utah (0.695 till July 1, ‘10)	0.695	1.70
Delaware	1.15	1.60	Maryland	2.00	2.00	North Carolina	0.35	0.45	Vermont	1.79	2.24
District of Columbia	1.00	2.50	Massachusetts	1.51	2.51	North Dakota	0.44	0.44	Virginia	0.30	0.30
Florida	0.339	1.339	Michigan	2.00	2.00	N. Marianas Islands	N/A	1.75	Washington	2.025	3.025
Georgia	0.37	0.37	Minnesota	1.23	1.56	Ohio	1.25	1.25	West Virginia	0.55	0.55
Guam	N/A	3.00	Mississippi	0.18	0.68	Oklahoma	1.03	1.03	Wisconsin	1.77	2.52
Hawaii (2.60 until July 1, 2010)	1.80	3.00	Missouri	0.17	0.17	Oregon	1.18	1.18	Wyoming	0.60	0.60
Idaho	0.57	0.57				Pennsylvania	1.35	1.60

Source: Federation of Tax Administrators State Tobacco Excise Tax Rates on a pack of 20 cigarettes January 1, 2008 and 2010

Kentucky and West Virginia, Tennessee, Indiana, Arkansas, Missouri, Ohio, Louisiana, South Carolina and Alabama all had populations in which 25 percent or more people smoked. Kentucky and West Virginia have the highest smoking rates, between 26 percent (Maugh ’10) and 31 percent (Live Science ’10). States that were under the national smoking average of 21 percent included: California, Idaho, Montana, the District of Columbia, New Jersey, Minnesota, Hawaii, Massachusetts, Arizona and Maryland. Utah has the lowest smoking rate at 10%, and California is second with a rate just below 13%, according to CDC figures. At least 24 states: Alaska, Arizona, Arkansas, California, Colorado, Florida, Hawaii, Idaho, Indiana, Iowa, Kentucky, Louisiana, Michigan, Minnesota, Nebraska, New Jersey, New Mexico, New York, North Carolina, Oklahoma, Oregon, South Dakota, Utah and Washington use cigarette excise tax revenue to fund their tobacco control programs (Maugh ’10). Since 1986, adult smoking in California has dropped by about 40% and, lung cancer rates in the state have been declining four times faster than in the rest of the country (Live Science ’10). Higher rates of smoking correlated with lower rates of formal education, according to the Gallup organization. West Virginia, Kentucky, Arkansas, Indiana, Tennessee and Oklahoma, for example, are all states where fewer than 25 percent of residents have college degrees. Massachusetts, Connecticut, Maryland, New Jersey and the District of Columbia, all areas with high rates of education, had some of the lowest rates of smoking.

Source: Federation of Tax Administrators State Tobacco Excise Tax Rates on a pack of 20 cigarettes. 2010

Tobacco taxes continue to be a focus of attention for states in 2010, for two reasons: raising state revenue and achieving public policy health goals such as discouraging tobacco use. At least 33 states considered legislation to increase tobacco taxes in 2009.Some states (Hawaii, Mississippi, New Hampshire, Oregon and South Carolina) had several bills pending, not all of which may be described below. The bills vary regarding the proposed amounts of increase, their earmarked purposes and their fiscal impact on the state. Some measures include general revenue goals while others aim to fund health programs or change smoking habits. As of April 1, 2009, the average retail price per pack of cigarettes was boosted by 61.66 cents, plus tax increases in three states, for a new estimate of $4.82; this compares to $4.10 back on January 1. State tobacco tax collections for 2007 totaled $15,262,111,000 in the 50 states (not counting Washington, D.C., or local governments). By comparison, state alcohol beverage taxes were $5.1 billion. The state bills filed as of Feb. 3, 2009, were drafted before passage of the federal tobacco tax increase of 61.66 cents (for a federal tax total of $1.00 plus 0.66 cents) on Feb. 4, 2009. The federal law includes proportional increases for other tobacco products. In general, state tobacco taxes are not tied to the federal tax rate. In 2009, bills increasing tobacco tax rates became law in sixteen states: Arkansas, Connecticut, Delaware, Florida, Hawaii, Kentucky, Mississippi, New Hampshire, New Jersey, North Carolina, Oregon, Pennsylvania, Rhode Island , South Dakota, Vermont, Wisconsin and the District of Columbia. The Rhode Island increase passed the legislature and became law without the governor's signature. The Oregon law increases the rate of tax on the distribution of moist snuff and smokeless tobacco. South Dakota reallocated tobacco tax revenue to allow more health uses. As of July 2010, bills increasing tobacco excise tax rates have become law in four states: Hawaii, New Mexico, South Carolina and Utah (National Conference of State Legislatures ‘10). Tobacco excise taxpayers may factor in the state increase when calculating the 3 percent annual price increase from March 31, 2009. States should re-consider tax increase on roll-your-own and small cigar, particularly since the federal tobacco tax increase of 2009 weight so heavily on smokers of roll-your-own and small cigars. Tax relief for the poor is much more stimulating of the economy than tax relief for the rich. States should not fear refunding smokers of cheap tobacco.

Part 4 Epidemiologic Theory Targeting Smokers

One in five Americans lights up regularly. Despite the reduction in smoking over the last four decades, smoking remains the No. 1 cause of preventable death to health propagandists. Every year, an estimated 446,000 Americans are attributed to having died from smoking-related diseases. Utah has the lowest smoking rate at 10 percent, and California is second with a rate just below 13 percent, according to CDC figures. Utah has the second longest life expectancy in the nation and since 1986, adult smoking in California has dropped by about 40 percent and, as a result, lung cancer rates in the state have been declining four times faster than in the rest of the country. In contrast, Kentucky and West Virginia have the highest smoking rates, with about 26 percent of adults smoking in 2009 and 31 percent in 2010. According to the Centers for Disease Control and Prevention, after 40 years of continual declines, the smoking rate in the United States has stabilized for the last five years, with one in every five Americans still lighting up regularly. Half of all children are exposed to second hand smoke in their home and 98% of children living with a smoker have measurable levels of toxic chemicals in their blood stream, setting them up for future harm from cancer, heart disease and a variety of other ailments (Maugh ’10). No epidemiologic theory pertaining to the immunity of smokers to deadly modern diseases such as cancer, heart disease and emphysema is admissible without accounting for the lack of government control over the toxicology of their own bio-medical research. Not only have the biggest American tobacco corporations been under Court restitution orders pertaining to the adding of addictive and toxic chemicals to their cigarettes but the government has been covering up this and other bio-medical information. Surgeon General Warning Labels arbitrarily sentence smokers to death by deadly disease with utter disregard for the epidemiologic theory everyone is hooked on - nicotine withdrawal causes psychosis.

More than 45 million American adults smoke tobacco regularly, one in five Americans, more than 8 million of these people exposed to tobacco are living with a serious illness caused by smoking. It is estimated that about 438,000 Americans die prematurely each year as a result of tobacco use, of 2.4 million deaths this is only 18 percent and around 20 percent of the population smoke. Granted, the rate of elderly smokers is reported to be far lower than in younger adults. Death certificates discriminate on the basis of whether or not that person is a smoker. If these statistics, which rarely distinguish between premium cigarette, rolling tobacco and pipe tobacco smokers, were taken literally, smokers die less often than non-smokers. From a pursuit of happiness perspective to health it makes a lot of sense to light up. The peculiar nature of addiction studies is that smoking is a stress reliever, so the more a smoker is prohibited and otherwise oppressed, the more they desire to smoke. The psychiatric diagnosis of nicotine withdrawal is characterized as a psychotic hallucination and smoking itself as an attempt to self-medicate for the natural and often unpleasant schizophrenia that clouds one’s judgment. From a theological perspective smoking is an expensive form of prayer teenagers pick up in reaction to the mutations in the gene pool of their immediate family, that they become addicted to complicating conflicts with certain health conditions. Constant prayer to God best fills the psychotic void of the silent smoke-stopper. Schools banned smoking in the 1980s, now half of those with GEDs smoke while those with graduate degrees only smoke 6 percent of the time. Federal legislative measures in the 90s led to smoke free workplaces. In the 2000’s States enacted Smoke-free workplaces, restaurants, bars. Teachers and legislators concur - smoking stinks more than segregation, apartheid, emphysema, cancer, heart disease, and pregnancy. After 40 years of increasing social exclusion 31 percent of smokers are poor compared to the 14 percent national poverty rate.

Smokers are formerly integrated oppressed minority. In recent decades smokers have been socially excluded by Congress from grade school, all public offices, workplaces, bars, restaurants and housing. Probably because smoking is a reaction to oppression, after cigarette machines and smoking areas were banned in high schools in the late 80’s and early 90’s the teenage rebellion rate of high school smoking rose from 25 percent, around the same as the general population, to 40 percent before dropping down to national levels in the early 1990s. The rational for this segregation of smokers is derived from the first Surgeon General's Report on Smoking and Health of 1964. On January 11, 1964, Luther L. Terry, M.D., Surgeon General of the U.S. Public Health Service, released the first report of the Surgeon General's Advisory Committee on Smoking and Health. On the basis of more than 7,000 articles relating to smoking and disease already available at that time in the biomedical literature, the Advisory Committee concluded that cigarette smoking is a cause of lung cancer and laryngeal cancer in men, a probable cause of lung cancer in women and the most important cause of chronic bronchitis. The release of the report was the first in a series of steps, still being taken more than 40 years later, to diminish the impact of tobacco use on the health of the American people. For several days, the report furnished newspaper headlines across the country and lead stories on television newscasts. Later it was ranked among the top news stories of 1964.

Early on, the U.S. Congress adopted the Federal Cigarette Labeling and Advertising Act of 1965 that required a health warning on cigarette packages. The Public Health Cigarette Smoking Act of 1969 banned cigarette advertising in the broadcasting media. In September 1965, the Public Health Service established a small unit called the National Clearinghouse for Smoking and Health. Through the years, the Clearinghouse and its successor organization, the Centers for Disease Control and Prevention's Office on Smoking and Health, have been responsible for 29 reports on the health consequences of smoking. In close cooperation with voluntary health organizations, the Public Health Service has, supported successful state and community programs to reduce tobacco use, disseminated research findings related to tobacco use and ensured the continued public visibility of antismoking messages. Within this evolving social milieu, the population has given up smoking in increasing numbers. Nearly half of all living adults who ever smoked have quit. The antismoking campaign has cut smoking rates in half and is a major public health success with few parallels in the history of public health. It is being accomplished despite the addictive nature of tobacco and the powerful economic forces promoting its use. Efforts to implement proven interventions must be continued and expanded (Office on Smoking and Health, National Center for Chronic Disease Prevention and Health Promotion, Centers for Disease Control and Prevention December 2006). Cigarette manufacturers have been prohibited from using broadcasting media to advertise their products funding for anti-smoking propaganda should be limited to free pamphlets and documentaries films to prohibit the use of mass media advertising services. Many cigarette manufacturers pay for anti-smoking campaigns secretly knowing the oppressive reminder to quit will drive addicts to light up.

Estimating the costs of the negative externalities resulting from cigarette smoking and other tobacco use is a highly controversial subject. In general, these externalities fall into two categories. First, the financial externalities associated with the impact of tobacco use on the costs of healthcare, group health and life insurance, pensions, and other collectively financed programs. Second, the costs associated with the health and other consequences of exposure to environmental tobacco smoke (ETS). The U.S. Centers for Disease Control & Prevention estimates that health costs caused by smoking total $7.18 per cigarette pack sold and smoked in the United States. According to the CDC, cigarette smoking was estimated to be responsible for $193 billion in annual health-related economic losses in the United States ($96 billion in direct costs and $97 billion in lost productivity). Until the 1960s, the United States not only grew but also manufactured and exported more tobacco than any other country. Since 1964 conclusive epidemiological evidence of the deadly effects of tobacco consumption has led to a sharp decline in official support for producers and manufacturers of tobacco, in spite of its indisputably large contribution to the agricultural, fiscal, manufacturing, and exporting sectors of the economy. Tobacco is an agricultural commodity product, similar in economic terms to agricultural foodstuffs: the price is in part determined by crop yields, which vary depending on local weather conditions. The price also varies by specific species grown, the total quantity on the market ready for sale, the area where it was grown, the health of the plants, and other characteristics individual to product quality. Laws around the world now often have some restrictions on smoking, but 5.5 trillion cigarettes are still smoked each year by 1.2 billion smokers. Tobacco is often heavily taxed.

Tobacco, one of the most widely used addictive substances in the world, is a plant native to the Americas and historically one of the half-dozen most important crops grown by American farmers. More specifically, tobacco refers to any of various plants of the genus Nicotiana, (especially N. tabacum) native to tropical America and widely cultivated for their leaves, which are used primarily for smoking; and to the leaves of the plants, dried and processed chiefly for use in cigarettes, cigars, or snuff; or for smoking in pipes. From 1617 to 1793 tobacco was the most valuable staple export from the English American mainland colonies and the United States. The tobacco industry comprises those persons and companies engaged in the growth, preparation for sale, shipment, advertisement, and distribution of tobacco and tobacco-related products. It is a global industry; tobacco can grow in any warm, moist environment, which means it can be farmed on all continents except Antarctica. The tobacco industry is particularly significant for those seeking to understand modern public relations techniques and the operations of specific companies for two reasons. Firstly, as a global industry that came under sustained criticism from the mid-twentieth century onwards, it pioneered many big-budget campaigns that fueled the growth and evolution of the public relations industry. Secondly, as a result of legal actions against the major tobacco companies, there are now over 40 million pages of internal company documents publicly available on searchable websites that provide a fascinating insight into the inner workings of past and still running campaigns. During the 17-year period, between 1990 and 2007 cigarette production decreased by about 34%, exports decreased by about 34%, and consumption dropped by about 31%.

Chart 5 Production, Export and Domestic Consumption of Cigarettes, 1990-2007

Source: US Department of Health and Human Services

The tobacco industry is one of the most profitable and deadly industries in the world. The global cigarette business alone is valued at $559.9 billion USD. The World Health Organization estimates that tobacco use could kill one billion people during the 21st century, with the majority of those deaths occurring in developing countries. The international tobacco market is dominated by five major transnational tobacco companies (TTC), China National Tobacco Company (CNTC), Philip Morris International (PMI), British American Tobacco (BAT), Japan Tobacco International (JTI) and Imperial Tobacco, The US market is dominated by four key manufacturers known as Big Tobacco: Altria, which sells roughly half of the nearly 500 billion cigarettes sold in the US, Reynolds American, Loews subsidiary Lorillard Tobacco Company (part of Carolina Group), and Vector Group's Liggett unit. Legal battles continue to dog the tobacco industry. Smokers stricken with cancer and other smoking-related health problems have tried to pool their complaints together in large class-action lawsuits. Often, the courts frown upon such tactics; however, individuals have fared much better, but face lengthy appeals from the tobacco giants. The US Department of Justice also is pursuing a case against the industry, citing 50 years of evidence it claims points to a cover-up of the health risks associated with smoking. These industry developments have forced some major reshuffling among members of Big Tobacco. To combat challenges from discount brands as well as the industry giant Altria, R.J. Reynolds and British American Tobacco joined forces in the US, forming Reynolds American.

Of course, Big Tobacco manufacturers aren't the only companies important to the tobacco industry. Companies such as Universal Corporation, DIMON, and Standard Commercial act as middlemen, buying from farmers and/or tobacco auctions and then processing and shipping leaf tobacco to manufacturers. Globally, other companies, such as BIC and Zippo Manufacturing, provide tobacco-related accoutrements; UST markets snuff and chewing tobacco; and companies such as Swedish Match sell a combination of tobacco-related products. Altadis, created from a merger of France and Spain's top tobacco producers, makes 50% of the cigars sold in the US. In Japan the tobacco industry is dominated by government-owned Japan Tobacco, which controls 75% of the market. Other top markets include Germany (dominated by Altria and Reemtsma Cigarettenfabriken), the UK (where smokes by Gallaher Group and Imperial Tobacco are preferred), and France. As discount manufacturers such as Commonwealth Brands chip away at market share, the global companies have increasingly turned to developing nations for new smokers. The Asia/Pacific region accounts for much of this new frontier. China, with some 25% of the world's 1.2 billion smokers, is the big prize. Government-owned China National Tobacco, the world's largest tobacco producer, principally serves China and the estimated 1.5 trillion in annual cigarette sales. Both Imperial Tobacco and Gallaher Group have signed agreements to produce and sell cigarettes in China.

After 40 years of repression the global anti-smoking campaign needs to work on their civil rights to ensure the addicted victims are compensated for the economic disadvantages imposed by the excessive rolling tobacco and small cigar tax after decades of segregation and apartheid health legislation. According to a study, published in the CDC's Morbidity and Mortality Weekly Report, about 20.9 percent of adults smoked in 2005 and 20.6 percent in 2009. A recent 2010 Gallup poll reported an increase in the smoking rate in the highest smoking states, Kentucky and West Virginia, from 26 percent in 2008 to 31 percent in 2010. In high smoking states the federal tobacco tax seems to have caused an increase in smoking. Tentative national reports have also indicated a slight rise in smoking rates since the tobacco tax and economic recession. People are losing their smoke-free workplaces and houses, so they are smoking. In the summer of 2009 the FDA was given responsibility for the oversight of the sale, marketing, and manufacture of cigarettes. While the health sector might produce the most influential propaganda for extortion the inflation in health care costs indicate that the health sector is unskilled with price and production controls in general. Epidemiologic research regarding exposure to the tobacco smoke needs to take better account of the health effects of the alternatives to pre-rolled cigarettes – roll-your-own, cigars and pipe tobacco – and the benefits of organic tobacco. The Treasury must ensure the tobacco tax was not excessive and that organic tobacco is readily available to addicts at prices they can afford.

Part 5 Socio-Economic Issues

The primary social issue pertaining to the tobacco tax is that the cheap chemical free tobacco was disproportionately taxed. This disparately impacted the poor, who had less to spend on other commodities, reducing national consumption. Social Security beneficiaries, avid low income smokers, have been denied their annual Cost of Living Adjustment (COLA) in 2009 and 2010 on account of insufficient inflation in the Consumer Price Index (CPI), after the largest 5 percent COLA on record in 2008. Low income smokers who are disability beneficiaries generally receive between $600 and $700 a month. Seventy five percent of this below poverty line budget is generally spent on housing and utilities and the remaining $250-300 is either eaten or supplemented with free food, State Food Cards and HUD rental subsidies. As the result of this tax increase the cost of cigarettes rose from $4 to $5 a day for pre-rolled and dramatically from $1 to $5 a day for roll-your own who didn’t downgrade to pipe tobacco. For a typical social security beneficiary who retired before working much, earning $666 a month, who naturally smoked the cheapest $1 day tobacco, the cost of tobacco rose from $30 a month, 12 percent of the monthly cash economy of the beneficiary, to as much as $150 a month, the same cost as pre-rolled, a whopping 60 percent of the monthly budget. Per capita the cost of smoking the cheapest cigarettes went from $360 a year to $1,800 a year a 403 percent increase. For low end social security benefits making less than $8,000 this represents an increase from 4.5 percent to 22.5 percent of income. This drove many beneficiaries to also apply for food cards and other government services. A September study of a 2010 Gallup Poll found smoking is related to sex, educational levels and race. 24 percent of men smoke, compared with 18 percent of women. Nearly half of those with a GED and a quarter of those with no high school diploma smoke, compared with only 6 percent of those with a college graduate degree. About 31 percent of those who smoke live below the poverty level, the national average rose as high as 16 percent during the recession. Nearly 30 percent of multiracial adults and 23 percent of American Indian and Alaska Natives smoke (Maugh ’10). 18 percent of the world’s 6.8 billion population – 1.2 billion smokes.

Table 6 Prevalence of Smoking and Smoke-free Workplaces, Restaurants, Bars and Homes, by State, 2010

State

Rate 2010

Smoke Free Work

Smoke Free Restau

rants

Smoke Free Bars

Smoke Free Home

States

Rate 2010

Smoke Free Work

Smoke Free Restau

rants

Smoke Free Bars

Smoke Free Home

State

Rate 2010

Smoke Free Work

Smoke Free Restau rant

Smoke Free Bar

Smoke Free Home

Alabama

22.1%

73.8%

Kentucky

25.2%

60.9%

North Dakota

18.1%

Yes

74.8%

Alaska

21.5%

79.5%

Louisiana

20.5%

Yes

74.7%

Ohio

20.1%

Yes

66.7%

Arizona

15.9%

Yes

82.6%

Maine

18.2%

Yes

75.8%

Oklahoma

24.7%

71.0%

Arkansas

22.3%

Yes

65.1%

Maryland

14.9%

Yes

81.5%

Oregon

16.3%

Yes

84.8%

California

14.0%

87.6%

Massachusetts

16.1%

Yes

80.3%

Pennsylvania

21.3%

Yes

71.5%

Colorado

17.6%

Yes

82.6%

Michigan

20.5%

70.9%

Rhode Island

17.4%

Yes

77.9%

Connecticut

15.9%

79.5%

Minnesota

17.6%

Yes

79.3%

South Carolina

20.0%

Yes

75.0

Delaware

17.8%

Yes

77.5%

Mississippi

22.7%

72.7%

South Dakota

17.5%

Yes

76.7%

District of Columbia

16.2%

Yes

73.7%

Missouri

25.0%

69.5%

Tennessee

23.1%

Yes

68.9%

Florida

17.5%

Yes

84.0%

Montana

18.5%

Yes

79.4%

Texas

18.5%

81.3%

Georgia

19.5%

79.2%

Nebraska

18.4%

Yes

76.7%

Utah

9.3%

Yes

90.6%

Hawaii

15.4%

Yes

83.7%

Nevada

22.2%

Yes

81.7%

Vermont

16.8%

Yes

75.4%

Idaho

16.9%

Yes

87.3%

New Hampshire

17.1%

Yes

80.7%

Virginia

16.4%

79.1%

Illinois

21.3%

Yes

73.8%

New Jersey

14.8%

Yes

82.0%

Washington

15.7%

Yes

87.0%

Indiana

26.0%

66.2%

New Mexico

19.4%

Yes

76.7%

West Virginia

26.5%

62.6%

Iowa

18.8%

Yes

72.4%

New York

16.8%

Yes

75.3%

Wisconsin

19.9%

72.5%

Kansas

17.9%

75.5%

North Carolina

20.9%

73.1%

Wyoming

19.4%

70.2%

Source: Centers for Disease Control and Prevention. State Highlights. 2010

The empirical evidence shows that higher cigarette taxes result in higher cigarette prices. Because of the addictive nature of tobacco use, demand for tobacco products is more elastic in the long-run. Prices generally rise with taxes. In general, taxes in low- and middle-income countries are well below taxes in high-income countries; consequently cigarette prices in low- and middle-income countries are well below prices in high income countries. Moreover, the cigarette tax usually accounts for two-thirds or more of price in higher-income countries (with the notable exception of the United States), compared to half or less of the price in many low- and middle-income countries. When specific excise taxation (based on quantity) is the primary form of taxation, the real value of the tax will fall over time, unless regularly increased to account for inflation. Given that taxes are important components of the prices of tobacco products, one consequence of using specific excise taxes is that the real prices of tobacco products will decline over time as the prices of other goods and services increase more rapidly. In the United States, for example, the relative stability of federal and state cigarette excise taxes in the 1970s contributed to a drop of nearly 40% in real cigarette prices between 1971 and 1981 that was reversed by a series of federal and state tax increases in the 1980s and 1990s. In contrast, under a system that primarily uses ad valorem taxation (based on value), the real value of the tax and the real price of tobacco products will likely be stable over time as nominal prices rise with the prices of other goods and services.

The primary historical motivation, and still the most common rationale for tobacco taxation, is its revenue-generating potential. While tobacco tax revenues have historically accounted for as much as 3–5% of total government revenues, their importance has generally declined over time. A fundamental principle related to the efficiency of taxation is that taxes which generate substantial revenues, while minimizing the welfare losses associated with the higher prices resulting from the taxes, are preferable to those that result in greater welfare losses. As the so-called ‘Ramsey Rule’ dictates for consumption taxes, the level of taxes will be inversely related to the price-elasticity of demand (holding the supply elasticity constant). Thus, goods with relatively inelastic demands are taxed more heavily, while those with relatively elastic demands should be taxed least (Ramsey ’27). Estimates indicate that a relatively modest increase of 10% in cigarette taxes would lead to an increase of almost 7%, on average, in cigarette tax revenues. It has been argued that higher tobacco taxes will lead to increased smuggling and related criminal activity, while not reducing tobacco consumption or increasing tobacco tax revenues. A second common objection to tobacco tax increases is that they will fall disproportionately on the poor (Sunley ’98). A basic principle of tax policy is the notion of vertical equity, which suggests that individuals with the greatest ability to pay should be taxed more heavily. This notion is reflected, for example, in progressive income tax systems where marginal tax rates rise as incomes rise. Cigarette and other tobacco taxes, however, appear to violate this principle. These taxes would be regressive with respect to income if the consumption of tobacco products was the same for both more affluent and poorer individuals (Chaloupka ’00).

Table 7 Tobacco Tax as % of Price and % of Total Government Revenues, selected countries, circa 1990

	Price	Tax	Tax as % of Price	% of Gov. Rev.
Low Income Countries
China	0.20	0.08	38	9.05
India	0.37	0.28	75	1.81
Zimbabwe	0.43	0.34	80	1.04
Lower Middle Income Countries
Bulgaria	0.60	0.25	42	2.80
Colombia	0.06	0.03	50	0.73
Upper Middle Income Countries
Argentina	1.38	0.97	70	4.00
Brazil	1.05	0.79	75	4.88
Chile	0.88	0.62	70	3.38
High Income Countries
Australia	4.85	3.15	65	3.04
Denmark	5.21	4.38	84	1.73
Finland	4.49	3.28	73	1.73
Spain	1.38	0.99	72	2.20
United Kingdom	4.16	3.24	78	2.98
United States	1.94	0.58	30	0.41

Source: Tables 10.1 & 10.2 Chaloupka et al World Bank ‘00

The State has various motives for tobacco taxation, including the use of these taxes to generate revenues, and the earmarking of tobacco tax revenues and barriers to tobacco taxation to improve economic efficiency and public health. Sugar, rum, and tobacco, are commodities which are no where necessaries of life, which are become objects of almost universal consumption, and which are therefore extremely proper subjects of taxation. . . . In the mean time the people might be relieved from some of the most burdensome taxes; from those which are imposed either upon the necessaries of life, or upon the materials of manufacture. The labouring poor would thus be enabled to live better, to work cheaper, and to send their goods cheaper to market. The cheapness of their goods would increase the demand for them, and consequently for the labour of those who produced them. This increase in the demand for labour, would both increase the numbers and improve the circumstances of the labouring poor. Their consumption would increase, and together with it the revenue arising from all those articles of their consumption upon which the taxes might be allowed to remain (Smith, 1776, Book V, Chapter III, pp. 474–476.). Shortly after Columbus returned to Europe bringing tobacco from the New World with him, tobacco use was subject to much controversy. Indeed, a number of countries soon adopted laws prohibiting the sale of tobacco and/or its public use, while others described tobacco as a ‘social menace’—among the more severe penalties for selling and/or consuming tobacco products were whippings, beheadings, and nose slittings in Russia, China, Turkey, India, and elsewhere. However, it was not long before these laws were repealed as treasuries realized that significant revenues could be generated from the sale and taxation of tobacco and tobacco products. For centuries, nearly every country in the world has taxed tobacco and/or tobacco products, largely because the relatively inelastic demands for these products make them an easy source of revenues. Over time, as the health consequences of cigarette smoking and other tobacco use were discovered, increased taxation of these products has been used, by at least some governments, as a way of extorting damages to offset the health costs associated with smoking (Chaloupka ’00).

The price system works so well, so efficiently, that we are not aware of it most of the time. Prices perform three functions in organizing economic activity: first, they transmit information; second, they provide an incentive to adopt those methods of production that are least costly and thereby use available resources for the most highly valued purposes; third, they determine who gets how much of the product distributed by income (Friedman 80: 14). The price system is the mechanism that performs this task without central direction, without requiring people to speak to one another or to like one another. The price system enables people to cooperate peacefully in one phase of their life while each one goes about his own business in respect of everything else (Friedman 80: 13). Money serves as a medium of exchange. Money is a unit of account. The value of all other commodities are expressed in terms of money. Money acts as a store of value, a place to hold wealth temporarily between productive investments (Gordon 04: 43). The key insight of Adam Smith’s Wealth of Nations of 1776 is misleadingly simple: if an exchange between two parties is voluntary, it will not take place unless both believe they will benefit from it (Friedman 80: 37). The monopolist will generally set a price below the short-run profit-maximizing level when consumption is addictive and future prices will exceed future marginal costs because of their monopoly power. The lower price ‘hooks’ consumers on their addictive product, thus raising the future demand for this product. When cigarette taxes are increased, cigarette companies will raise prices by more than the amount of the tax increase in order to obtain the maximum profits from current, addicted smokers. The increase in current profits helps them offset the future losses from the reduced smoking initiation that results from the tax and price increase. Becker and his colleagues explained this apparent paradox as follows: If smokers are addicted and if the industry is oligopolistic, an expected rise in future taxes and hence in future prices induces a rise in current prices even though current demand falls when future prices are expected to increase (Becker ’96).

The oligopolistic nature of the tobacco industry in most countries has significant implications for the effects of tobacco tax increases on the prices of tobacco products. Models of oligopoly behavior suggest that increases in taxes would be at least partially borne by tobacco firms. Historically, there is consistent evidence of collusive behavior among tobacco firms (although it falls short of perfectly collusive, or monopoly, behavior). For example, internal industry documents recently uncovered as part of Washington state’s lawsuit against US tobacco companies suggest that Philip Morris and British American Tobacco (the two largest multinational tobacco companies) colluded to fix cigarette prices and divide markets in Costa Rica, Argentina, Venezuela, and other Latin American countries. Most of the more recent empirical studies of the tax-price relationship that have modeled the dynamic, oligopolistic behavior of tobacco companies conclude that increases in cigarette taxes lead to significant increases in cigarette prices. For example, data on wholesale and retail cigarette prices, as well as data on manufacturing costs and state cigarette taxes, estimated the impact of the doubling of the US federal cigarette tax (from 8 to 16 cents per pack) in 1983 on US cigarette prices. The tax increase led to a price increase that was more than double the size of the tax hike (17 cents), which could not be explained by increases in manufacturing costs. The introduction of generic cigarettes in 1981 was used as the mechanism for coordinated, oligopolistic increases in the prices of premium cigarettes. The lower-priced, lower-quality generic cigarettes kept at least some of the more price-sensitive smokers in the market. Using annual, state-level data for the period from 1960 through 1990, it was estimated that a 1-cent increase in a state’s cigarette tax would lead to a 1.11-cent increase in the state’s average cigarette prices (Keeler et al ‘96).

Part 6 Colonial Legislation of the Tobacco Trade

In 1619 the price of tobacco was three shilling the beste, and the second sorte at 18d. the pounde. In April 1684, the Assembly passed a law declaring that prohibiting certain classes of people from growing tobacco, providing for destroying part of the crop, prohibiting the planting of tobacco for one year had passed beyond the bounds of riot and that their aim was the subversion of the government. It was enacted that if any persons to the number of eight or more should go about destroying tobacco plants, they should be adjudged traitors and suffer death. On his return from discovering America Columbus brought tobacco back to Europe and in the next century the habit spread rapidly in the Old world, and the cultivation of tobacco had begun to spread around the Mediterranean Basin. The first permanent European settlement was founded by Captain John Smith in Jamestown on May 14, 1607 (Friedman 80: 252). Life was hard, starvation and hostile natives were constant threats. The local Indians of eastern Virginia were also addicted to tobacco but the variety they grew was not popular with the English colonists who preferred the tobacco produced by the Spanish in the West Indies. Then in 1612 a man named John Rolfe brought some seeds he had obtained in Trinidad and planted them. The grew abundantly in Virginia with the help of the local Indians and in 1616 he took the first commercial crop to England that was such a success they celebrated the first American Thanksgiving upon his return in 1617 (Gordon 04: 42). By 1616 the Virginia Company had transported more than seventeen hundred people to Virginia and invested the staggering sum of 50,000 pounds in its enterprise on the Chesapeake. To make back their money the English turned to Nicotiana tabacum, tobacco. King James loathed tobacco, which he regarded as an instrumentality of the devil, and he wrote and published a pamphlet entitled A Counterblaste to Tobacco. His subjects, however, paid no attention whatever to the royal opinion and smoking continued to increase in popularity (Gordon 04: 14-15). The first law passed by the first General Assembly of Virginia, July 31, 1619, twelve years after Captain John Smith landed and tobacco was the local currency (Friedman 80: 250).

Table 8 American Tobacco Exported to England 1615-1695 and 1772

(in thousands of pounds)

	1615	1625	1635	1645	1655	1665	1675	1685	1695	1772
Total Exports	2.5	131.8	1,500	4,500	6,500	14,000	17,659	28,000	28,000	106,979

Source: Series Z 457-459 Historical Statistics of the United States: Colonial Times to 1970. Vol. 2 pg. 1191

British law effectively forbade the establishment of banks in the colonies and also forbade the export of British coinage from Britain, to preserve its own money supply. With no banks, American colonies could not use banknotes. This left the colonies to create a money supply as best they could. Money is a commodity, no different from pork bellies, legal services, or computer keyboards except in one vital respect. Money, by definition, is a commodity universally acceptable in exchange for every other commodity. Metals, gold, silver, copper, iron, tin have been the most widely used forms among more advances economies before the victory of paper and the bookkeeper’s pen (Friedman 80: 250) With the English embargo on exporting coins, the new English colonies in America had to solve the problem of getting a money supply another way. In 1652 Massachusetts began minting its own coins despite strict laws forbidding anyone other than the royal mint to do so. The pine tree shilling, the first coin minted in North America, was produced for people who brought their own silver. The British did not suppress its production for thirty years. Other colonists turned to the Spanish dollar that probably accounted for half the coinage in circulation in the North American colonies. In New Netherlands and elsewhere the fur trading Indians used wampum as a medium of exchange and so too did their Dutch and English speaking customers (Gordon 04: 43). In 1760 however, J.C. Campbell of New Jersey opened a factory for making counterfeit wampum, destroying the value of the genuine article (Gordon 04: 44).

It is intriguing tobacco was both used as money and in lieu of gold as a currency back. In Maryland and Virginia, at various periods tobacco was declared the only legal currency. Tobacco remained a basic money of Virginia and its neighboring colonies for close to two centuries, until well after the American Revolution. Tobacco was the money that the colonists used to buy food, clothing, to pay taxes, even to pay for a bride. By the turn of the eighteenth century, the legislatures had established tobacco as the legal tender for paying taxes and public debts. Legislation set standards for minimum quality but did not control inflation civilly. To fight inflation, one evil law after another was passed prohibiting certain classes of people from growing tobacco, providing for destroying part of the crop, prohibiting the planting of tobacco for one year. As early April 1684, the Assembly passed a law declaring the prohibition had passed beyond the bounds of riot and that their aim was the subversion of the government. It was enacted that if any persons to the number of eight or more should go about destroying tobacco plants, they should be adjudged traitors and suffer death (Friedman 80: 250-252).

To regulate the quality of the tobacco traded in 1698 Maryland found it necessary to legislate against the fraud of packing trash in hogsheads that contained good tobacco on top. Virginia adopted a similar measure in 1705, but apparently it did not offer relief. The idea of tobacco money worked so well that it soon spread to other colonies in New England and to Pennsylvania, which issued its first paper money in 1723. In 1727 tobacco notes were legalized. These were in the nature of certificates of deposits issued by the inspectors. To foster confidence in this “fiat money” that is money only because the government says it is money, rather than being itself a valuable commodity, in 1729, when he was only twenty-three, Benjamin Franklin, published a pamphlet entitled “A Modest enquiry in the Nature and Necessity of Paper Currency (Gordon 04: 46). In 1730 Virginia set up an inspection system, requiring planters to bring their tobacco to public warehouses where it would be inspected and warehouse receipts issued for its value. These warehouse receipts functioned in the same way as banknotes, although they fluctuated in purchasing power far more, being tied to a volatile commodity, tobacco. Because they were legal tender in payment of taxes and other government obligations, these tobacco backed bills circulated as money, although often at a discount from face value, until Congress pronounced the “monetary unit of the United States of America shall be one dollar” in 1785 before adopting the cent, five-cent, dime and fifty-cent coins advocated by Thomas Jefferson, in his “Notes on the Establishment of a Money Unit” of 1786 (Gordon 04: 45).

Part 7 Development of the Federal Regulation and Taxation of Tobacco

The Founding Fathers had no doctrinal commitment to the unregulated marketplace. They were not proponents of laissez-faire. Their legacy was rather that blend of public and private initiative known in our own day as the mixed economy (Schlesinger 99: 223). Early American corporations were quasi-public agencies, chartered individually by statute. They were granted franchises, bounties, bond guarantees, rights of way, immunities and other exclusive privileges to enable them to serve specified public needs. In many cases state governments bought shares in corporations and installed their representatives on the board of directors (Schlesinger 99: 225). Alexander Hamilton's tax package of 1794 proposed the first federal excise taxes upon tobacco products. To the distress of Philadelphia snuff manufacturers (Brooks, 1952: 146), however, the tax was restricted after serious Congressional debate to their product only. James Madison led the opposition to a general tobacco tax; his views were summarized in the Annals of Congress on May 2, 1794: As to the subject before the House, it was proper to choose taxes the least unequal. Tobacco excise was a burden the most unequal. It fell upon the poor, upon the sailors, day-laborers, and other people of these classes, while the rich will often escape it (McGrew ‘79).

The legislative decision was probably tempered as well by considerations of the enforceability of the measure: snuff had to be manufactured, while quid and pipe tobacco were often homegrown leaf at the time. In any case, the snuff bill was ultimately enacted, modified, suspended and repealed, with small, if any, effect upon federal revenues. The opportunity to distill tax money from tobacco was seized upon more vigorously at the time of the Civil War. On July 1, 1862, an ad valorem tax was imposed upon cigars for the first time. This tax was raised two years later when a separate tax upon cigarettes was also imposed. (Even the Confederacy sought to levy a tax-in-kind upon tobacco crops, but was precluded from doing so by the inspection system which required the inspector to deliver the full amount of tobacco specified in the warehouse receipt. Thereafter, the taxes were raised in 1865, 1866 and 1875. A temporary reduction followed, until the Spanish-American War necessitated further increases. Concurrently, taxes were levied upon smoking and manufactured tobacco and snuff, lest the burden fall unequally upon smokers. By 1880, the tobacco taxes bad largely stabilized. At that time, they accounted for 31% of total federal tax receipts, or $38.9 million. Of this, 50% of the collections were derived from smoking and chewing tobacco, 40% from cigars and cheroots, and less than 2% from cigarettes (McGrew ’79).

Table 9 Historical Federal Tobacco Tax Revenues 1863-1970

2010		1930	450,339,000
2000		1920	295,809,000
1990		1910	58,118,000
1980		1900	59,355,000
1970	2,094,212,000	1890	33,959,000
1960	1,931,504,000	1880	38,870,000
1950	1,328,464,000	1870	31,351,000
1940	608,518,000	1863	3,098

Source: US Census Bureau. Historical Statistics of the United States. Series Y 365 Internal Revenues Collections 1863 to 1970. Pgs. 1107-1108

Since that time, federal tax collections on tobacco products have risen almost annually. Between 1910 and 1920, tobacco prices increased more than 500%, the greatest increase in any single decade. The percentage of the total federal tobacco revenue jumped from 13.6% in 1910 to 51.1% in 1920. By 1970, federal tobacco taxes accounted for almost $2.1 billion in tax revenues, down slightly from the two preceding years. By 1970, the percentage at 97.2% far outdistanced those revenues derived from other forms of the product. Excise taxes have proved profitable and easy to collect. The revenue schemes are simple on both the federal (26 U.S.C. 5701 et seq.) and state levels. In the past, no justification for them has been deemed necessary since Madison's protest. No elaborate licensing or state monopoly system, such as those designed to control commerce in alcohol, has ever been imposed. In 1921, Iowa became the first state to cash in on the crop directly by taxing cigarettes. By 1930, 11 other states had adopted the revenue measure. In 1950, 40 states and the District of Columbia taxed cigarettes. The rates ranged from one cent to five cents for a pack of 20 except in Louisiana which levied an eight cent tax on cigarettes. In 1958, Montana imposed an equivalent rate. Between 1950 and 1962, 43 of the 47 taxing states raised their rates at least once. The frequent increase in cigarette taxes narrowed the gap between the rates in low tax states and higher tax states. In the 12-year period, the median tax rate rose from three cents to six cents per pack; the maximum rate remained at eight cents in Texas, Louisiana, Montana and New Mexico, in contrast to the two cent rate in the District of Columbia and Kentucky.

The four leading states in terms of both production and relative dependence on the crop have been North Carolina, South Carolina, Kentucky and Virginia, the latter two being the only states in the history of cigarette taxation to decrease their taxes; the reduction was only .5 cent (from three cents to two and a half cents) in 1960 and 1961, respectively. By 1966, Oregon became the 49th state to impose a tax on cigarettes; the rate was four cents per pack. Finally, in 1969 North Carolina imposed a cigarette tax-two cents. The cigarette excise taxes continued to increase during the sixties. By 1970, the taxes ranged from North Carolina's two cents to Pennsylvania's 18 cents for a weighted average of 10.7 cents. Twenty nine states levied taxes of 10 cents or more per pack. Local governments superimposed further excise taxes on the state taxes, ranging from one cent to 10 cents per package. By mid-1971, the range had widened further Connecticut at 21 cents and North Carolina at two cents, the weighted average state tax being 11.1 cents (McGrew ‘79). Most of the more recent empirical studies of the tax-price relationship conclude that increases in cigarette taxes lead to significant increases in cigarette prices. In the United States, for example, the relative stability of federal and state cigarette excise taxes in the 1970s contributed to a drop of nearly 40 percent in real cigarette prices between 1971 and 1981 that was reversed by a series of federal and state tax increases in the 1980s and 1990s. The introduction of generic cigarettes in 1981 kept at least some price conscious smokers in the market when the US federal cigarette tax doubled from 8 to 16 cents per pack) in 1983 led to a price increase that was more than double the size of the tax hike (17 cents). Using annual, state-level data for the period from 1960 through 1990, it is estimated that a 1-cent increase in a state’s cigarette tax would lead to a 1.11-cent increase in the state’s average cigarette prices (Keeler et al ’96).

Part 8 Concluding Remarks: Extortion Pays for Torture, Stimulate the Economy, Refund Cheroot and Roll-your-own Smokers

The Children’s Health Insurance Program Reauthorization Act of 2009 (CHIPRA, Public Law 111–3) Title VII Revenue Provisions Section 701 Increase in Excise Tax Rate on Tobacco Products, imposed a 2,653 percent tax increase on small cigars and 2,159 percent tax increase on roll-your-own tobacco beginning April 1, 2009. Small cigarettes, large cigarettes, chewing tobacco, snuff, pipe tobacco, cigarette papers and cigarette tubes were subjected to a more reasonable 158 percent increase and large cigars a 155% increase and no floor tax (ATTTB ‘09). Because the tax increase on roll-your-own and cheroots was excessive, smokers of roll-your-own and small cigars are due a full refund of annual costs incurred by this excessive tax under 26 USC(F)(65)(B)§6423(c). The Secretary of Treasury shall hold a Show Cause Hearing regarding the suspension and revocation of the April 1, 2009 permit for the Alcohol and Tobacco Tax and Trade Bureau (ATTTB) to tax small cigars and roll-your-own tobacco under Section 702(b)(1) whereas Congress and the ATTTB has not in good faith complied with this chapter…involving intent to defraud and extort from the weakest willed addicts of small cigars and hand-rolling tobacco despite the fact the health threats might have a chilling effect on freedom of speech and right to petition the government. ATTTB has violated the conditions of such permit to tax by failing to credit the CHIPRA amendments with a percent figure for the dollar increase in tobacco excise tax because it the need to refund rolling tobacco and cheroot smokers their money. ATTTB failed to disclose the material information required to alert the Congress and the public that the percentage change in the tax on small cigars and rolling tobacco preferred by the poor was 13 times and 17 times greater than the increase on all other tobacco products.

ATTTB has failed, as the result of their excessive tax of the low priced rolling tobacco and small cigars, to maintain its premises in such manner as to protect the revenue. There is no denying that CHIPRA is a regressive tax. The price of rolling tobacco and small cigars, smoke by the poor, has gone up from $1 a day to $5. It now costs as much, or nearly as much, to buy roll-your-own as to buy pre-rolled tobacco. The cost of smoking went up dramatically for cost sensitive low income beneficiaries and beggars addicted to cheap cheroots and roll-your-own tobacco. The repressiveness of the CHIPRA tax is more likely to drive more smokers to abandon the child-proof method of hand rolled cigarettes and as a result may not be so successful at reducing teen smoking, as other fairer taxes have been. Current reports indicate smoking rates may have even risen slightly in response to the stress of the tax increase and recession, into the 20 to 21 percent range. In 1970 the Average cost per pack was $0.38 the Average tax per pack was $0.18, the taxes and segregations of the 1980s and 90s drove many to smoke cheaper rolling tobacco that cost a $1 a day or $3 for 3 days of chemical free tobacco. In 2009 after the tax the average cost per pack, or daily ration, of both pre-rolled and roll-your-own that previously cost little more than $1 or $2 a pack, had reached $5.33 and the average state and federal tax per pack was $2.19. For a typical social security beneficiary who retired before working much, earning $666 a month, who naturally smoked the cheapest $1 day tobacco, the cost of tobacco rose from $30 a month, 12 percent of the monthly cash economy of the beneficiary, to as much as $150 a month, the same cost as pre-rolled, a whopping 60 percent of the monthly budget, driving many to smoke pipe tobacco.

More than 45 million American adults smoke tobacco regularly, one in five Americans. More than 8 million people exposed to tobacco are estimated to be living with a serious illness irritated by smoking. It is estimated that about 438,000 Americans die prematurely each year as a result of tobacco use; of 2.4 million deaths in 2008 this is not very alarming. Hype regarding these mortality statistics is excessive as smokers comprised only 18 percent of all deaths and it is estimated around 20 percent of the population smoke. Smoking might be indicative of good health, older people, who are more likely to be sick, smoke at dramatically reduced rates. A September study of a 2010 Gallup Poll found smoking is related to sex, educational levels and race. 24 percent of men smoke, compared with 18 percent of women, and 21 percent coed. Nearly half of those with a GED and a quarter of those with no high school diploma smoke, compared with only 6 percent of those with a college graduate degree. About 31 percent of those who smoke live below the poverty level, the national average rose as high as 16 percent during the recession. Nearly 30 percent of multiracial adults and 23 percent of American Indian and Alaska Natives smoke (Maugh ’10). 18 percent of the world’s 6.8 billion population – 1.2 billion smoke. For the past 40 years smokers around the world have suffered deprivations of their right to light up in schools in the 1980s, smoke free workplaces in the 1990s and smoke-free restaurants and bars in the 2000s. 31 percent of all smokers are poor and the habitual users of what used to be much cheaper roll-your-own tobacco and cheroots are probably more than twice as likely to be poor, one guestimates 75 percent. Despite the high price smokers are not dissuaded by the 2009 tobacco excise tax and the stress of the tax and recession seem to be driving smoking rates slightly up after a three decade decline and one decade of slower decline. The smoking rate in the States with the highest smoking rates jumped from 26 percent in 2008 to 31 percent in a September 2010 Gallup poll. It behooves States to allow bars and restaurants to

Cigarette taxes are associated with smoking rates. It's not clear whether taxes discourage smoking or whether states with fewer smokers are more likely to pass high cigarette taxes. In states where smoking was well above average, the average state cigarette tax was $0.66 a pack. In average states, it was $1.59, and in below-average states, it was $2.02. The only exceptions to the rule were the well-below average states for smoking, Utah and California, where the average cigarette tax is on the low end — $0.78. Utah's 13 percent smoking rate could be explained by high rates of Mormonism, which forbids smoking - And again, tobacco is not for the body, neither for the belly, and is not good for man, but is an herb for bruises and all sick cattle, to be used with judgment and skill (D&C 89:8). The poll can't explain California's 16 percent rate (Live Science ’10) although California does have a popular Surgeon General warning label and the reduction in cancer rates has been four times as faster than elsewhere. The Campaign for Tobacco Free Kids claims every 10 percent increase in the price of cigarettes reduces youth smoking by about seven percent and overall cigarette consumption by about four percent (Sanders ’09). A basic principle of tax policy is the notion of vertical equity, which suggests that individuals with the greatest ability to pay should be taxed more heavily. This notion is reflected, for example, in progressive income tax systems where marginal tax rates rise as incomes rise. Cigarette and other tobacco taxes, however, appear to violate this principle. These taxes would be regressive with respect to income if the consumption tax on tobacco products was the same for both more affluent smokers of pre-rolled cigarettes and poorer smokers of roll-your-own tobacco and cheroots (Chaloupka ’00). Poor smokers of the cheapest roll-your-own tobacco and small cigars are due a refund, particularly the cost-of-living-adjustment (COLA) less social security beneficiaries and those unemployed during the recession, most inclined to budget for the cheapest possible high.

According to the CDC, cigarette smoking was estimated to be responsible for $193 billion in annual health-related economic losses in the United States ($96 billion in direct costs and $97 billion in lost productivity). Currently, about $25 billion is available to states from cigarette taxes, and about $700 million of that is spent on smoking prevention (Maugh ’10). For consumption taxes, the level of taxes will be inversely related to the price-elasticity of demand (holding the supply elasticity constant). Thus, goods with relatively inelastic demands are taxed more heavily, while those with relatively elastic demands should be taxed least (Ramsey ’27). Estimates indicate that a relatively modest increase of 10% in cigarette taxes would lead to an increase of almost 7%, on average, in cigarette tax revenues. It has been argued that higher tobacco taxes will lead to increased smuggling and related criminal activity, while not reducing tobacco consumption or increasing tobacco tax revenues. A second common objection to tobacco tax increases is that they will fall disproportionately on the poor (Sunley ’98). For many years, researchers viewed cigarette smoking and other addictive behaviors as exceptions to this most basic law of economics because of the seeming irrationality of these behaviors. Literature, however, indicates that the demand for tobacco products do respond to changes in prices and other factors (Chaloupka ’00). These reactions are not necessarily rational. CHIPRA of 2008-2009 was rife with random school and workplace gun violence at every stage of its process, as well as behind the scenes toxic substance abuse. The Treasury needs to ensure all the Attorney General Master Tobacco Settlement are deposited in the S-CHIP Fund to safeguard against the concealment of assets from the federal government by the States. Poor people sensitive to changes in price switch brands, cuts of tobacco. In 1980’s the shift was to Generics, in the 1990’s to rolling tobacco and in 2010 to pipe tobacco, not to pay a tobacco addiction, more than $1 a day.

The poorest American smokers have undergone great deprivation as the result of the largest tobacco excise tax increase on roll-your-own tobacco and small cigars in history. The US has always had a low rate of tobacco excise taxation by international standards, 30 percent of retail, as opposed to 50-80 percent of retail in many countries. While it is not unusual that the US should increase their cigarette tax 158 percent, it was particularly cruel for the US to increase the tax on the cheapest hand-rolling tobacco 2,159 percent, and cigars more than 2,653 percent. Under 18USC(95)§1951(b)(2) the term "extortion" means the obtaining of property from another, with his consent, induced by wrongful use of actual or threatened force, violence, or fear, or under color of official right. The excessive federal tobacco excise tax clearly amounts to extortion under color of official right. Congress failed in their duty of care to their most impoverished taxpayers. By colluding with the Big Five Tobacco companies to raise the taxes on the formerly lower priced roll-your-own tobacco and small cigars, fully conscious of the relationship between tax and retail price, Congress did help Big Tobacco to price fix their competition. By failing to appropriate the assets of the $249 billion over 30 years Attorney General Master Tobacco settlement - $8.3 billion a year, Congress did conceal assets. With $8.7 billion in total S-CHIP program expenditures, $2.7 billion from States and $6 billion from the federal government, the CHIPRA Tobacco Tax increase not only disparately impacted the poorest payers of excise taxes but was medically unnecessary whereas the Master Tobacco Settlement can pay for S-CHIP in its entirety and the Master Tobacco Settlement must be praised from the Courts by the Treasury to eliminate torture treatment ordered by legal officers to doctors in violation of AMA Code of Medical Ethics. While childhood immunization costs may rise gradually over the years it is imperative that medical cost increases be limited to no more than 3 percent per year.

Source: Centers for Disease Control and Prevention

For many years, numerous researchers viewed cigarette smoking and other addictive behaviors as exceptions to this most basic law of economics because of the seeming irrationality of these behaviors. A now substantial and rapidly expanding literature, however, clearly indicates that the demands for tobacco products do respond to changes in prices and other factors (Chaloupka ’00). The Campaign for Tobacco Free Kids claims every 10 percent increase in the price of cigarettes reduces youth smoking by about seven percent and overall cigarette consumption by about four percent (Sanders ’09). The repressiveness of this CHIPRA tax is more likely to drive more smokers to abandon the child-proof method of hand rolled cigarettes and as a result may not be so successful at reducing teen smoking, as other kinder and gentler taxes in the past. Current reports indicate smoking rates may have even risen slightly in response to the stress of the tax increase and recession. In 1970 the Average cost per pack was $0.38 the Average tax per pack was $0.18, the taxes and segregations of the 1980s and 90s drove many to smoke cheaper rolling tobacco that cost a $1 a day or $3 for 3 days of chemical free tobacco. In 2009 after the tax the average cost per pack, of both pre-rolled and roll-your-own, had reached $5.33 and the average tax per pack was $2.19. In 2008 roll-your-own cost between $1 and $2 a day. After CHIPRA roll-your own tobacco cost $5 a day and The price system works so well, Adam Smith called it the invisible hand that so efficiently allocates available resources for the most highly valued purposes, without central direction, without requiring people to speak to one another or to like one another. The price system enables people to cooperate peacefully in one phase of their life while each one goes about his own business in respect of everything else (Friedman 80: 13). The federal government would greatly stimulate the economy if they targeted, temporary tax relief to refund the low spending smokers of rolling tobacco and small cigars for the excessive federal excise tax of 2009 under 26USC(F)(65)(B)§6423(c).

As the result of this tax increase the cost of cigarettes rose from $4 to $5 a day for pre-rolled and tragically from $1 to $5 a day for roll-your own tobacco smokers who didn’t get the news to downgrade to pipe tobacco. For a typical social security beneficiary who retired before working much, earning $666 a month, who naturally smoked the cheapest $1 day tobacco, the cost of tobacco rose from $30 a month, 12 percent of the monthly cash economy of the beneficiary, to as much as $150 a month, the same cost as pre-rolled, a whopping 60 percent of the monthly budget. Per capita the cost of smoking the cheapest cigarettes went from $360 a year to $1,800 a year a 403 percent increase. For low end social security benefits making less than $8,000 this means an increase in tobacco related expenses from 4.5 percent to 22.5 percent of income. This drove many beneficiaries to also apply for food cards and other government services. Fiscal stimulus must target poor people most likely to spend all tax relief on consumer goods and services, and fiscal stimulus measure must be temporary. A tobacco tax refund would very likely help to stabilize the economy because for three reasons. First, a temporary tobacco tax refund targeted to the poorest smokers of roll-your-own tobacco and cheroots, satisfies the requirements of fiscal stimulus and is likely to inject every penny of lost federal revenue into more efficient venues of individual choice and preference than the government can allocate collectively. Second, a tax refund compensates the victims of an arbitrary and excessive tax, without exposing the consumer to any torture, thereby disentangling CHIPRA of 2009 from the role of price fixing for Big Tobacco. Third, the Treasury will improve financial security appropriating the revenues from the Attorney General Master Tobacco Settlement and satisfying the S-CHIP account. The poor will be able to afford chemical free tobacco of their choice, tobacco control efforts will not be undermined by the counterintuitive addicted reaction to the stressor of an excessive excise tax, public health will be safer and the economy will be skillfully stabilized by properly targeted fiscal stimulus to the poor victims, if only in a little way.

The Spirit clearly says in the latter times some will abandon the faith and follow deceiving spirits and things taught by demons (1 Timothy 4:1). They are spirits of demons performing miraculous signs. Heed the signs. Behold I come like a thief! (Revelation 16:14) Blessed is he who stays awake and keeps his clothes with him, so that he may not go naked and be shamefully exposed (Revelation 16:15). Why do you seek the living amongst the dead? He is not here but has risen (Luke 24:5-6). Such teachings come through hypocritical liars, whose consciences have been seared as with a hot iron. They forbid people to marry and order them to abstain from certain foods, which God created to be received with thanksgiving by those who believe and who know the truth. For everything God created is good, and nothing is to be rejected if it is received with thanksgiving, because it is consecrated by the word of God and prayer (1 Timothy 4:2-5). Swear to God that you won’t torture me (Mark 5:7). Go home to your friends and tell them what great things the Lord has done for you and how he has had compassion for you (Mark 5:19). Quit smoking, God has given you words to pray with twenty times a day. Evening, and morning and at noon, will I pray and cry aloud, and he shall hear my voice (Psalm:17) Then shall ye call upon Me, and ye shall go and pray unto Me, and I will hearken unto you (Jeremiah 29:12) Whatsoever you desire, when you pray, believe that you receive them, and you shall have them (Mark 11:24). If you shall ask anything in my Name I will do it (John 14:14). The effectual fervent prayer of a righteous man avails much (James 4:16). Why pay taxes to pray to a God who answers the prayers of the poor?

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Statute

Children’s Health Insurance Program Reauthorization Act of 2009 (CHIPRA, Public Law 111–3)

Cigar Tax Rates 27CFR(I)(40)(C)§40.21

Conditions on Allowance in the Case of Alcohol and Tobacco Taxes 26USC(F)(65)(B)§6423

Data to be shown in claims 27CFR(I)(46)(A)§46.8

Execution and Filing of Claim 27CFR(I)(46)(A)§46.7

Federal Cigarette Labeling and Advertising Act of 1965

Interference with Commerce with Threats and Violence 18USC(95)§1951

Pipe Tobacco and Roll-your-own tobacco tax rates and classification 27CFR(I)(40)(C)§40.25a

Public Health Cigarette Smoking Act of 1969