You got to hand it to Big Tobacco. They may called a lot of things but “stupid” is not one of them. A recent Associated Press Article highlights antics Big Tobacco took to circumvent federal tobacco taxes. Shrewd marketing on behalf of Big Tobacco helped them avoid paying hundreds of millions of dollars in tobacco taxes annually simply relabeling pipe tobacco as suitable for tobacco within “roll your own” cigarettes. The traditional “roll your own” tobacco which was taxed at the higher rate of $28 per lbs has been replaced with the pipe variety which is taxed at a mere $2.8 per lb. The politicians championing the Children Health Insurance Plan (CHIP) contend that CHIP has a lot to lose due of Big Tobacco’s marketing “malfeasance.”
For those that don’t know, pipe tobacco tends to be coarser and moister. However, that is an industry standard, not a legal one. The distinction that the federal government makes is simply one of product labeling and intended usage, not of the actual product itself. Thus, enterprising retailers simply redirected their customers to the new pipe tobacco which would be cheaper due to the tax avoidance switcharoo.
So where are those tax dollars going, anyway? Your guess is as good as ours. In one sense, avoiding paying the “piper” so to speak might be a good thing. If the taxes are merely extortionist payments to the states and these taxes do nothing to reduce tobacco consumption — then what’s the point? Some might argue that Big Tobacco is offering a cost-effective alternative to their end customers. A proverbial “win-win” you might say. While we cannot possibly comment on the legality of such a maneuver, we can applaud Big Tobacco’s efforts in pointing out the hypocrisy and arbitrariness of the tobacco tax laws.
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