Obama Proposes Doubling Tobacco Tax

President's 2016 budget includes 94-cent increase on cigarettes, small cigars

Obama 2016 Budget tobacco (CSP Daily News / Convenience Stores / Gas Stations)

WASHINGTON --In a move that will not be welcomed by tobacco retailers, President Barack Obama in his $4-trillion budget proposal for 2016 has proposed to nearly double taxes on cigarettes and small cigars to $1.95 per pack from $1.01 per pack, and to index the tax for inflation, according to a Politico report.

As reported in a 21st Century Smokes/CSP Daily News Flash, the increases would pay for an extension of the Children's Health Insurance Program (CHIP), which is due to end this year if Congress doesn't extend funding, and Obama's ongoing proposals to guarantee universal access to preschool. It would raise $95 billion, said the report.

Here are the portions of the budget document relevant to tobacco:

The budget maintains sup­port for the President's landmark Preschool for All proposal to ensure four-year-olds across the nation have access to high-quality preschool pro­grams. The proposal establishes a federal-state partnership to provide all low- and moderate-in­come four-year-olds with high-quality preschool, while providing States with incentives to expand these programs to reach additional children from middle class families and put in place full-day kindergarten policies. The proposal is paid for through an increase in tobacco taxes that will help reduce youth smoking and save lives. …

The budget invests $15 billion over the next 10 years to extend and expand evidence-based, vol­untary home visiting programs, which enable nurses, social workers and other professionals to work with current and expecting parents to help families track their children's develop­ment, identify any health and development issues and connect them to services to address them and utilize good parenting practices that foster healthy development and early learning. As with Preschool for All, the proposal is paid for through an increase in tobacco taxes. …

The budget expands access to preventive benefits and tobacco cessation for adults in Medicaid. …

CHIP currently serves over eight million children of working parents who are not eligible for Medicaid. The Budget proposes to extend funding for CHIP, which ends in 2015, through 2019, ensuring con­tinued, comprehensive, affordable coverage for these children. The proposal is paid for through an increase in tobacco taxes that will help reduce youth smoking and save lives.

Click here to view the full Fiscal Year 2016 Budget. And click here to view an "interactive budget."

Other details of the budget, according to an Associates Press report:

  • A six-year, $478 billion public works program would pay for highway, bridge and transit upgrades. About $238 billion would come from a one-time, 14% mandatory tax on the up to $2 trillion in estimated U.S. corporate earnings that have accumulated overseas. The top corporate rate for U.S. earnings would drop to 28%; foreign profits would be taxed at 19%, with companies getting a credit for foreign taxes paid. The remaining $240 billion would come from the federal Highway Trust Fund, which is financed with a gasoline tax.
  • The capital gains rate on couples making more than $500,000 per year would increase from 24.2% to 28%. Obama wants to require estates to pay capital gains taxes on securities at the time they are inherited. He is trying to impose a 0.07% fee on the approximately 100 U.S. financial companies with assets of more than $50 billion.
  • Obama would take the $320 billion that those tax increases would generate over 10 years and funnel them into low- and middle-class tax breaks. His ideas: a credit of up to $500 for two-income families, a boost in the child care tax credit to up to $3,000 for each of up to two children under age 5 and overhauling breaks that help pay for college.