U.S. loses more than $250 million in tax revenue from tobacco law loophole

[Ed Barrow]

Source: Associated Press

A tobacco tax loophole in President Barack Obama's children's health insurance program cost the government more than $250 million in its first year, public health officials say.

The loophole allowed companies to avoid huge tax increases on loose rolling tobacco by relabeling their product as pipe tobacco. The simple marketing twist lets companies pay $2.83 per pound, rather than the $24.78 per pound levied on rolling tobacco.

That proved an expensive technicality in the way the government pays for health insurance for poor children. Almost immediately, tobacco companies ramped up production of pipe tobacco to record levels and curtailed production of roll-your-own tobacco.

...

The trend has not changed. In March, the one-year anniversary of the tax change, companies produced more than 2 million pounds of pipe tobacco. It was a record month for an industry that steadily produced about 270,000 pounds a month before the tax changed.

Read more: http://www.nydailynews.com/money/2010/06/02/2010-06-02_us_loses_more_than_250_million_in_tax_revenue_from_tobacco_law_loophole.html

[Tunkamerica]

1. those taxes are ridiculous

something like a 2000% increase. And why didn't they raise pipe tobacco taxes? Is it because poor people smoke roll your own and rich people smoke pipes? Couldn't be! Maybe it's the same reason you can strill smoke indoors at country clubs and cigar bars here.