Some political smoke for the mirrors
Today's Financial News - Posted April 3, 2009
The House has given its nod to allow the FDA to regulate the cigarette industry. Will the measure make it through the Senate? Oddly enough, Altria’s (NYSE:MO) Phillip Morris hopes the bill becomes law.
By Andrew Snyder, TodaysFinancialNews.com
Baltimore – (TFN): I always called the nation’s countless lottery systems its broadest “poor” tax, but now it looks like the Obama administration is tackling a new vice, cigarettes.
As of Wednesday, the nation’s smokers are forced to pay an additional $0.68 tax on every pack of cigarettes they buy. Depending on the state, the price hike means the folks that light up are paying somewhere in the neighborhood of six bucks for every twenty smokes they buy, or thirty cents each.
A pack-a-day habit will now run just shy of $200 per month.
Of course, the government argues the additional tax will force Americans to stop smoking, but their logic is circular at best. Our government has flat-out told us it needs new sources of income. What could be a better source than a socially battered, yet highly addictive product?
They can tell us they are trying to deter the nasty habit, but we all know Congress latched onto a tax source that is politically tough to debate and will not be dwindling anytime soon. It is one of the rare revenue sources with inelastic ties to the nation’s economy. People always smoke, no matter how broke.
Some smoke to go with the mirrors
Nevermind that the new tax breaks one of Obama’s keystone campaign promises or it taxes one of the poorest segment’s of the nation’s economy. It does not matter. The government needs our money.
It needs our cash to fund such overweight and underperforming agencies like the FDA. It just so happens the House voted to give the organization the authority to regulate the nation’s tobacco industry.
If the Senate gives its approval later this month, which is more likely than ever, the FDA would instantly gain the ability to control cigarette additives, nicotine labels, marketing campaigns and packaging guidelines.
The tobacco industry is the latest victim of the Obama administration’s addiction to regulation.
Oddly enough, some of the tobacco industry’s largest players, like Altria’s (NYSE:MO) Phillip Morris are in favor of answering to the FDA. It feels a new industry rulebook will lower competition and help it permanently lock in its market share dominance.
In fact, the company does not seem too worried about the impact of increased taxes on its sales either. It took the opportunity to raise prices in the days ahead of the new tax, apparently trying to mask its price hikes as part of the government’s increased fees.
If only we could all find a highly addictive product to sell to young buyers. The world of business would be so much easier.
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