Tax Hike on Tobacco is a Bad Idea

President George W. Bush

The White House

1600 Pennsylvania Avenue NW

Washington, DC 20500

Dear President Bush:

Recent reports indicate that a federal health advisory group commissioned by the Department of Health and Human Services will recommend that you increase the federal excise tax on cigarettes from 39 cents to $2 per pack. On behalf of the 280,000 members of Citizens for a Sound Economy (CSE), I urge you to protect taxpayers’ interests and refrain from endorsing this proposal.

The Interagency Committee on Smoking and Health (ICSH) recommends that half of the $28 billion that this tax increase will generate should go to providing resources for anti-smoking efforts, like a national quit line and additional advertising campaigns to influence consumers.

CSE believes that enacting a five-fold federal tax increase on cigarettes is the wrong remedy for this advisory group’s concerns. Regarding the desired anti-smoking efforts, both state and federal governments presently have adequate financial resources to invest in programs to curtail smoking. Specifically, in 1998 state governments and the tobacco industry agreed to a tobacco settlement, which will span 25 years at a cost of $246 billion, with a significant portion of that settlement allocated to state anti-smoking efforts.

Moreover last year, 21 states and the District of Columbia decided to raise tobacco taxes; in 2003, the states will generate $11.6 billion in excise tax revenue. Coupled with the $8.7 billion in tobacco settlement proceeds, the states will acquire more than $20 billion in tobacco related income in 2003. Certainly the states have enough funds to invest in their own anti-smoking campaigns without the need for more federal assistance by way of a $2 tax increase.

Furthermore, countless studies demonstrate that cigarette taxes are one of the most regressive taxes in the United States, affecting millions of low and middle-income families. It is estimated that individuals earning $30,000 or less pay about 50 percent of the excise taxes placed on a pack of cigarettes.

For these reasons, Citizens for a Sound Economy opposes renewed efforts to increase taxes at the federal level, and urges the administration not to endorse the proposed tax increase. Should you have any questions, please feel free to contact me at 202-783-3870.


Paul Beckner

President and CEO

Citizens for a Sound Economy

cc: Secretary Tommy Thompson, Department of Health and Human Services

Chairman Jim Nussle, U.S. House of Representatives Budget Committee