Blumenthal Introduces Legislation To Close Tobacco Loophole

(Hartford, CT) - U.S. Senator Richard Blumenthal (D-CT) today announced his introduction of S.3081, the Tobacco Tax Equity Act, to close a loophole in the tax code that allow tobacco companies to avoid the federal cigarette and roll-your-own (RYO) tobacco tax.
 
“Incredibly, the tobacco industry continues to seek profits by addicting children and avoiding taxes. I am proud to fight for the Tobacco Tax Equity Act to eliminate disparities in tobacco tax rates, closing a harmful loophole in our tax code that taxes repackaged pipe tobacco and other tobacco products at lower levels than cigarettes, small cigars, and roll-your-own tobacco. This bill equalizes the federal tax rate for all tobacco products to that of cigarettes. It will generate more than a billion dollars in revenue, and help prevent young people from beginning a deadly addiction,” Blumenthal said.

“The American Lung Association is a proud supporter of the Tobacco Tax Equity Act of 2012,” said Michelle Marichal, Interim Director of Health Promotion and Public Policy at the American Lung Association in East Hartford. “Senator Blumenthal’s bill will save lives because fewer kids will start using tobacco products and more people will quit.”

Under current law, small cigars and RYO tobacco products are taxed at the same level as cigarettes; however, cigars, smokeless tobacco, and pipe tobacco are taxed at a dramatically lower rate. As a result, tobacco manufacturers have started labeling pipe tobacco as tobacco for both pipe and roll-your-own usage, therefore claiming the lower pipe tobacco tax rate. Last month, a Government Accountability Office report found that RYO tobacco products are currently being sold in packages labeled as pipe tobacco – which is taxed at a lower rate – with no change to the product. Pipe tobacco is taxed at $21.95 per pound less than RYO tobacco as a result of the tax disparity.
 
The Tobacco Tax Equity Act, which Blumenthal introduced with U.S. Senators Dick Durbin (D-IL) and Frank Lautenberg (D-NJ), would create tax parity by establishing the tax rate on all tobacco products at the same per unit level as cigarettes. This legislation would eliminate the current tax incentive for tobacco companies to falsely label RYO tobacco as pipe tobacco in order to sell their product at a lower cost.
 
A recent report by the Centers for Disease Control and Prevention (CDC) revealed more than $1.3 billion in lost state and federal revenue as a result of tobacco manufacturers relabeling RYO tobacco as pipe tobacco. Between April 2009 and August 2011, Connecticut lost $3,155,720 in state tax revenue. By establishing tax parity and closing this loophole in the tobacco tax code, this bill would generate approximately $4 billion in revenue nationally over five years.
 
Every year, tobacco use kills 443,000 Americans, most of whom started using tobacco as teenagers. Although significant progress has been made to reduce tobacco use among adolescents and young adults, nearly one in four high school seniors and one in three young adults under 26 still smoke. A recent report by the Surgeon General labeled tobacco use a “pediatric epidemic” that will kill one out of every three young smokers. According to the Campaign for Tobacco-Free Kids, there are currently 76,000 kids in Connecticut who will ultimately die prematurely from smoking. Tobacco companies spend $10.5 billion a year — more than one million dollars an hour — to market tobacco products, including smokeless tobacco, in the United States.

A link to the Tobacco Tax Equity Act can be found here: https://www.blumenthal.senate.gov/download/?id=ad0eecb1-49f5-4bf0-a9b1-7c9407a57307