How Does the Government Get Our Money? The Tobacco Tax for One.

As I mentioned , I have been working on a series of pages, orignally intended to supplement NWTRCC’s website or literature, on the subject of “Where Else Does the Government Get Money to Make War, and What Can We Do About It?” (Where else other than the personal income tax, that is.)

Unfortunately, it seems that the defenders of the NWTRCC faith are not happy with the direction this project has taken so far, fearing that it would distract from the orthodox war tax resistance message the group has already established, or something like that.

So I’ve dropped the project, and will just go ahead and publish the pages I’ve assembled so far here instead. Here’s the first, along with some introductory material:

in a typical year, the personal income tax and social insurance taxes constitute about 80% of federal government revenue

Sources of Federal Revenue in a Typical Year

The United States government gets the majority of its revenue for conducting wars from two sources: the personal income tax and social insurance taxes (the “payroll” tax that ostensibly funds such programs as Social Security and Medicare). In addition, the government usually borrows a great deal of money to cover expenses that exceed its revenues. Another large source of revenue is the corporate income tax. A number of other taxes and fees and other sources of income make up the rest.

The receipts from some taxes and fees go into the federal government’s “general fund” from which it pays for most of its budget items, including most military spending. Receipts from other taxes and fees go into specific trust funds. For example, there is a tax on fuel that goes into the “Leaking Underground Storage Tank Trust Fund” that is used to fund the agency that oversees the cleanup of sites where fuel has seeped into the ground from leaking underground fuel storage tanks.

Some war tax resisters only want to resist taxes that go into the general fund but do not mind paying taxes that are at least nominally destined for such non-military-related trust funds.

However, Congress has a history of “borrowing” from trust funds to pay for general fund spending (including military spending). For example, it borrowed heavily from money paid into Social Security when more money was being collected by the payroll tax than was being paid out in Social Security benefits. Now that benefits paid are starting to exceed payroll tax receipts, Congress is balking at paying back this borrowed money and is instead talking of a Social Security “crisis” that will necessitate raising taxes or cutting benefits. What this amounts to is that all along, Congress treated the payroll tax as if it were money in the general fund that it could spend on war.

For this, and other reasons, some war tax resisters want to resist even those taxes that are ostensibly levied for non-military purposes.

The Excise Tax on Tobacco

Description

Every time someone buys a pack of cigarettes, they pay $1.01 in federal excise tax, and an average of $1.20 in state taxes (different states have different tobacco excise tax rates). Other tobacco products are also taxed.

Amount of the Tax

The federal excise tax on tobacco products rose sharply in , and has risen 321% since . As of , the federal tax rates on tobacco products are:

ProductTax rate
small cigarettes$59.33 per thousand
large cigarettes$105.69 per thousand
small cigars$59.33 per thousand
large cigars52.75% of sale price (or $0.4026 per cigar, whichever is less)
chewing tobacco$0.5033 per pound
snuff$1.51 per pound
pipe tobacco$2.8311 per pound
roll-your-own tobacco, blunt wrappers$24.78 per pound
rolling papers$0.0315 per fifty
cigarette tubes$0.0630 per fifty

In addition, every premises at which tobacco product manufacturing takes place is required to pay $1,000 per year in federal tax (some smaller manufacturers may pay a $500 tax instead).

How Much the Government Collects

In , the federal government reported collecting over $950 million in tobacco-related excise taxes.

How This Tax Is Collected

The manufacturer or importer of the tobacco product is liable for the federal tax. Tobacco products may be transferred from one licensed manufacturer or importer to another without tax being paid, but the final such entity who sells the product on its way to the end-consumer must pay the tax.

Are the Tax Receipts Earmarked?

These taxes go into the federal government’s general fund.

How Can You Resist This Tax?

Obviously, you can avoid contributing to tobacco taxes by not purchasing, manufacturing, selling, or using tobacco products.

In cases where the tax on tobacco products is considerably different in neighboring jurisdictions, some people evade the higher of the taxes by smuggling tobacco products from the low-tax jurisdiction to the higher-tax one and then selling (or using) the products there.

One can support the tax resistance of others by participating in the production and distribution of counterfeit tax stamps (such as are attached to cigarette packaging to indicate that the tax has been paid).

Another option is to “grow your own.” The process of growing and curing tobacco is complex but not completely out of reach of the small-scale producer. Don Carey of Freedom Township, Ohio, responded to a 2,153% increase in the excise taxes on roll-your-own tobacco by doing just that (see: “Smoker decides to grow his own tobacco” Ohio Beacon ).

See Also

  • Lovenheim, Michael F. “How Far to the Border?: The Extent and Impact of Cross-Border Casual Cigarette Smuggling” 61 National Tax Journal 7–33 ()
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