Cigarette Taxes Throughout History
The Beginning
In 1492, Columbus discovered what he described as a “dried leaf” to be given as gifts, and later thrown away. 26 years later, in 1518 Juan De Grijalva landed in Yucatan, and there he found the natives were smoking tobacco in cigarette form. By 1531, Tobacco was being cultivated in Europe and shipped across the world.
Tobacco Taxation Begins
As with any profitable crop, the government saw money to be made in taxing tobacco products. In 1794, under Alexander Hamilton’s tax package, the United States Congress passed the first Federal excise tax on tobacco products. From the beginning, the tax was fought and debated. However, by1880 tobacco taxes accounted for 31% of total federal tax receipts.
Civil War Taxes
To increase federal revenue during the Civil War cigars and cigarettes were singled out for additional taxation. While these taxes were meant to be temporary, they actually went up in 1865, 1866, and 1875. They did go back down for only a short time before being increased again during the Spanish-American War in 1922. Â
State Cigarette Taxation
In 1921, the State of Iowa made history by becoming the first State to collect taxes on cigarettes just for their state. By 1950, 40 States and the District of Columbia were also collecting State taxes on the sale of cigarettes. Â
Federal & State Cigarette Taxes
Although the very first U.S. cigarette excise tax was imposed to pay for the Civil War, over time it has become a solid source of state and federal revenue. In 2007 alone, the federal government collected over $7 billion dollars from cigarette related taxes, and all the states in the country combined collected an incredible $21 billion.
Current Cigarette Tax Increases
Over the past decade the average tax rate levied on cigarettes has increased nearly 200%, and our country’s recent financial troubles have led to dozens of new tax proposals on both the state and federal levels that include cigarette tax hikes. As of April 1, the Federal excise tax increased from $0.39 to $1.01 per pack as part of Presidents Obama’s State Children’s Health Insurance Plan. Â
In addition to Federal tax increases, dozens of states and local governments are also considering additional taxes on tobacco products. In San Francisco the mayor is considering an additional $0.33 tax per pack to pay for the cost of cleaning up cigarette butts. On the other side of the country, states like Arkansas and Kentucky have doubled their average taxes on cigarettes, and many other governments agencies are looking to follow suit.
About the Author
The Tax Lady Roni Deutch and her law firm Roni Lynn Deutch, A Professional Tax Corporation have been helping taxpayers across the nation find IRS tax relief for over seventeen years. The firm has experienced tax lawyers who can fight IRS tax liens on your behalf.
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