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Monday, September 6, 2010

Tax The Poor!

The Boston Tea Party, December 16, 1773


It has been a while since I've had a good rant, but a couple of unrelated stories I saw in the past couple of weeks started the ball rolling. There is a lot of talk about the upcoming expiration of the Bush tax cuts, and the dire consequences it will have on the economy. While I agree that increasing taxes in a collapsing economy is about the dumbest thing the government could do, I started wondering why the mainstream media is so bent out of shape about raising taxes on rich people, while they are totally silent on the already raised taxes on poor people.  Yes, I know the standard "poor people don't pay taxes" line, which, as you will see in the tables below, is total crap.

The first story (originally in the WSJ, but thankfully picked up here so I could link to it) concerns the rising use of cigarette rolling machines in tobacco shops, where pipe tobacco is being rolled into cigarettes.  Why pipe tobacco? Because the tax is much lower. In the table below, you can see the Federal tax rates for various tobacco products, before and after the April 2009 increase.



Product Tax Rate
effective
Mar. 31, 2009
Tax Rate
effective
Apr. 1, 2009
Increase (percentage)
Small Cigarettes (per carton) 3.9 10.06 257.95
Large Cigarettes (per 1000) 40.95 105.69 258.1
Small Cigars (per 1000) 1.82 50.33 2765.38
Large Cigars (per 1000) 48.75 402.6 825.85
Chewing Tobacco (per pound) 0.19 0.5 263.16
Snuff (per pound) 0.58 1.51 260.34
Pipe Tobacco (per pound) 1.09 2.83 259.63
Roll-your-own tobacco (per pound) 1.09 24.78 2273.39
Cigarette papers (per 50) 0.01 0.03 300
Cigarette tubes (per 50) 0.02 0.06 300
(Data from NoCigTax.com)

It seems the Obama administration figured out that people were saving money by rolling their own cigarettes, so they jacked the tax on roll-your-own tobacco over 2000%. Now, if you are rich, you are probably annoyed but not devestated by this increase. However, if you are poor (I would venture to guess not many rich people roll their own), this is a devastating increase. In trying to find affordable alternatives, they have resorted to rolling pipe tobacco into cigarettes. Well, the boys in the White House are catching on. I expect to see a huge increase in the taxes on both pipe tobacco and rolling papers after the election in November.

Now, I know what many of you are thinking: Hey, smoking is a lifestyle choice, if they can't afford it, they should quit.  Yes, I agree, the last thing the founding fathers of this country wanted was the ability of American citizens to make free choices. But what other "lifestyle choices" that poor people have made are being taxed?
Well, at the State level (I am using California as an example), just about all of them:


Year Sales Tax Gas Tax Cigarette Tax Booze Tax Wine Tax Beer Tax
2000 6 0.18 0.87 3.3 0.2 0.2
2001 5.75 0.18 0.87 3.3 0.2 0.2
2002 0.06 0.18 0.87 3.3 0.2 0.2
2003 7.25 0.18 0.87 3.3 0.2 0.2
2004 7.25 0.18 0.87 3.3 0.2 0.2
2005 6.25 0.18 0.87 3.3 0.2 0.2
2006 6.25 0.18 0.87 3.3 0.2 0.2
2007 6.25 0.19 0.87 3.3 0.2 0.2
2008 7.25 0.46 0.87 3.3 0.2 0.2
2009 8.25 0.4 0.87 3.3 0.2 0.2
2010 8.25 0.46 0.87 3.3 0.2 0.2
(Data from Taxfoundation,org)

In the last 10 years, California has raised taxes on people who make the lifestyle choice of buying things (as opposed to stealing them), increasing the sales tax from  6% in 2000 to 8.25% in 2010. If they make the lifestyle choice of driving to work, their gasoline tax has gone from 18 cents a gallon in 2000 to 46 cents a gallon in 2010. For whatever reason, drunks and smokers have not been targeted for tax increases, but I expect that to change as California's fiscal crisis worsens.

The other story, not directly related, and not necessarily pertaining to poor people, is the City of Philadelphia going after bloggers, who, as the city claims, are running a business without a business license. Now, maybe I am stupid, but how is a blogger different from, say, a book author or magazine writer who lives in Philadelphia, gets paid (however much or little) for his writing, and does not have a business licence? This is simply another shakedown by government thugs, and it shows how desperate Philadelphia is for money. By the way, Philadelphia, the birthplace of the U.S. Constitution, is calling it a business privilege licence, which means that they consider the first amendment to the U.S. Constitution a privilege.

What really torques me, though, is the grandstanding in the media (cough*Fox News*cough) about potential increases in taxes on the rich (increase the dividend tax by 2000% and Glen Beck will be screaming like a stuck pig about it), but are absolutely, 100% dead silent about the increase in the tobacco tax, and in fact are quick to point out the "unfair" loopholes, which the Feds will then close.

On December 16, 1773, the good people of Boston had had enough of the tax increases the British government was placing on them, and refused a shipment of taxed tea. The colonial Governor refused to send the tea back to England, so the ship loaded with tea sat in the harbor. A group of Bostonians boarded the ship at night, took the taxed tea, and dumped it into the harbor. That act, and the subsequent British reprisals, was the spark that ignited the American Revolution. If our fearless leaders aren't careful, they may soon find they have another one on their hands.

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