Saturday, December 05, 2009

Yankee Baccee Tax Loop Hole (-ier than thou)

An excellent read that has come our way from our cousin Michael in the US of A. He has drawn our attention to the following New York Times editorial and furnished us with his as yet unpublished response and his commentary. So read on for this three parter!

Part I - NYT Editorial

Roll Your Own Tax Rate

There are no records kept on how fast loopholes can be uncovered in new federal law, but the roll-your-own tobacco industry is making a breathtaking run for this year’s shabby laurels. No sooner had President Obama signed the new children’s health insurance law last spring than the industry pried open a lucrative escape from the 20-fold tax increase levied on roll-your-own cigarettes to help support the program.

Companies simply remarketed roll-your-own as “pipe tobacco,” which is taxed at one-tenth the rate and is not subject to any definitive distinction under the law. The result is that roll-your-own companies, while a small part of the cigarette industry, quintupled their output of pipe tobacco in just five months to 1.7 million pounds — enough to roll 42 million packs of cigarettes.

The evasion could cost the government more than $30 million a month in revenues, according to the Associated Press. But the potential cost to the public is far greater, since studies show higher cigarette taxes have proved to be an effective way to discourage children from smoking.
The new fear is that the gimmickry of rolling your own and using flavored (“pipe”) tobacco — now banned in packaged cigarettes — could prove irresistible for youngsters experimenting with life. And with death.

Obviously the new law is in urgent need of a no- nonsense amendment to bring roll-your-own under proper federal controls and full taxation. The companies plead they merely found a way to save their industry from taxes so prohibitive as to force them to close. That’s not a bad idea, given the public health findings about lethal smoking. But the companies’ gambit — the pretense of marketing pipe tobacco — is an outright deception.

Retailers are winking as they peddle pipe tobacco along with cigarette papers. This is not what President Obama and Congress had in mind in acting to bolster the health of young people. What’s the record for shutting a loophole?

Part II - Michael's Response

Dear Editor,

Your Nov. 21st Editorial about roll-your-own pipe tobacco being sold for cigarettes absolutely reeks of hypocrisy.

You speak of $30 million a month being "lost" while never mentioning that smokers are still paying well over a hundred times that amount each month in taxes. You speak of children being attracted to the "gimmickry" of rolling shreds of tobacco after all your years of editorializing about Big Tobacco's brand advertising being the cause of children smoking. You play the save the children card again by emphasizing "flavored tobacco - now banned in packaged cigarettes" while never mentioning that none of those cigarettes were coming from Big Tobacco or noting that the one major flavoring those companies actually do use, menthol, was given a built in exemption all of its own.

You end by asking "What's the record for shutting a loophole?" How about asking "What's the record for the largest single tax increase upon a minority group?" Does RYO tobacco's 2,130% increase upon the poorest segment of American smokers sound like the right answer?

Michael J. McFadden
Author of "Dissecting Antismokers' Brains"

Part III - Michael's Commentary
 
While I didn't have room to get into it in the letter, the "children card" was particularly annoying since they play on the image of "children attracted to gimmickry" thereby conjuring the image of a child between 6 and perhaps 10 or 12 years old.

In reality of course only about 1 child in a hundred would ever actually buy cigarettes at such an age: any smoking that goes on in that age range is almost universally the result of swiping them from a relative's pack or being given them by an older friend. And in further reality, probably 1 in a thousand of those 1 in a hundred would think of walking into a tobacco shop or going on the internet with a credit card and buying a pound of rolling "pipe" tobacco. And of those who indeed might do so, raising the price of such a pound from $25 to $50 would probably deter about 1 in 10 of those who displayed that much determination to begin with. We are now talking about one child in a million.

Of that one in a million how many do you think would be making such a well-thought-out purchase simply because they were attracted to the "gimmickry" of rolling their own? Maybe one in a hundred?

So we're talking about a 2,000% tax increase on five million or so pipe smokers in order to prevent the purchase of a pound of tobacco by roughly one such "child" in a population of a hundred million children.

Since there are only about 50 million such children at most in the US population, there's just about a fifty-fifty chance that even a single such incident would happen in a given year... but meanwhile those five million pipe smokers will all be paying a couple of hundred dollars extra for their enjoyment... close to one billion dollars overall to theoretically prevent one-half of a single "child" from trying smoking a few years earlier than he or she otherwise probably would anyway.

That's one of the reasons I devoted a whole subsection of Brains to the "Saving the Children" propaganda trick: it's a powerful card that's been played by such notables as Attila the Hun (We'll spare the children if you surrender!) to Adolph Hitler (The Jews are drinking the blood of Christian babies!) to Saddam Hussein (As he smilingly patted the little American child-hostage on the head for the TV cameras) to George Bush Sr. (As he lamented how the Iraqi soldiers were dumping premature Kuwaiti babies on hospital floors while stealing incubators.) Our biologically hard-wired love for our children makes us extremely vulnerable to the abuse of that love by those who would manipulate us for their own benefit and aims.

And now it's being used against pipe smokers.... not just in terms of this tax, but also in terms of the U.S. PACT act that will stop you from ever again ordering pipe tobacco through the mail or delivery services. Oh, and peripherally in the Health Insurance Plan in Congress that actually DOES seem to specify that you're quite fine with your pipe as long as you just smoke crack or meth in it... but your monthly premium will double if you dare fire up a bowl of cherry-flavored baccy!