President Biden has often said the $3.5 trillion budget reconciliation bill, “The Build Back Better Act,” will be paid for by the wealthy.  The legislation includes a significant expansion of existing programs and numerous new programs that will dramatically expand the size, scope, and impact the federal government plays on everyone’s lives and livelihoods.  President Biden has tried to assure most Americans that, “Anybody making less than $400,000 a year will not pay a single penny in taxes.  And we will not increase the deficit either, unlike the last gigantic tax cut, which increased the deficit by $2 trillion.”

This was always a false statement and the proof is in the details of the reconciliation bill as it moves through Congress.  On September 15, the House Ways and Means Committee passed its contribution to the mammoth spending bill.  The bill raised the individual and corporate income taxes, along with numerous new or increases to federal excise taxes on a variety of tobacco products, from small cigarettes, to cigars, to chewing tobacco, to electronic cigarettes. 

The range of increases is dramatic, from 100 percent for cigarettes to 2,034 percent for chewing tobacco.  A letter to the Ways and Means Committee from the Joint Committee on Taxation, obtained by CAGW, shows the bill would raise an additional $9.6 billion in federal excise taxes annually, an 84 percent increase over the  $11.4 billion currently collected annually, and hurt millions of Americans, especially those making far less than $400,000 a year.  The Tax Foundation has analyzed the tobacco product taxes and found that a “large portion of the new tax burden would fall on low-income Americans, as consumption of tobacco is more common in this group.  Moreover, the tax base is increasingly narrow given the decades long decline in tobacco consumption.”  There are few taxes more regressive than excise taxes, especially for tobacco and related products.  For example, a pack-a-day smoker in New York state that makes $15,000 annually will pay almost 20 percent of his or her income on tobacco consumption.

On September 14, 2021, the Council for Citizens Against Government Waste wrote a letter to the Ways and Means Committee expressing its objections to the new taxes.

Several of the harm reduction products have received “modified risk orders” from the Food and Drug Administration, which means studies have shown the product will or is expected to benefit the health of the population as a whole and they can be advertised as such.  For example, with respect to a snus product, the label can state, “Using General Snus instead of cigarettes puts you at a lower risk of mouth cancer, heart disease, lung cancer, stroke, emphysema, and chronic bronchitis.”

Another tobacco harm-reduction product, the heat-not-burn iQOS system, can place on its label, “The IQOS system heats tobacco but does not burn it; This significantly reduces the production of harmful and potentially harmful chemicals; Scientific studies have shown that switching completely from conventional cigarettes to the IQOS system significantly reduces your body’s exposure to harmful or potentially harmful chemicals.”

Placing an excise tax on these types of products is irrational.  If a smoker wanted to switch from cigarettes to something less harmful, the increased taxes would provide little incentive to do so.  Instead, many smokers will continue to use combustible cigarettes.  The chemicals created from burning tobacco and paper create the harmful chemicals, like benzene, ammonia, and carbon monoxide and are what causes diseases of the lungs, mouth, and heart.  In other words, the new taxes will lead to more disease and death from smoking.

An additional serious concern is these taxes will encourage a black market to flourish.  This will harm users, as was seen in the 2019 e-cigarette or vaping, product use-associated lung injury, or EVALI, where it was discovered that vitamin-E acetate, an additive to THC-containing vaping products, was found to be strongly linked to the illnesses.  Most of those that used a THC-containing product got it from an informal source, in other words, the black market.  And a rising black market will also hurt small businesses that sell tobacco harm reduction products, like variety stores.

For some time, CAGW has argued that the U.S. needs to take a different path when it comes to the use of tobacco harm reduction products by following the enlightened lead of Public Health England (PHE).  The British health agency, as do U.S. health agencies, understands that smoking remains the single largest cause of preventable death.  Instead of making vaping, heat-not-burn, and other tobacco harm reduction products pariahs, PHE encourages smokers to switch to regulated nicotine harm reduction products like vaping to help people stop smoking.  Similarly, in Sweden, where snus is used prevalently, the risk of a man dying from a tobacco-related illness is less than any other European country.

The federal excise taxes on THR products have nothing to do with helping people to quit smoking.  If government officials really want to stop people from smoking cigarettes, they would promote and keep taxes very low on these products, or at least use the money raised from the increased taxes on cigarettes to improve smokers’ health.  Instead, these taxes will fund Congress’s prolific spending habits and ironically disproportionately hurt the people they claim they want to help.