[Congressional Record Volume 159, Number 16 (Monday, February 4, 2013)]
[Senate]
[Page S466]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]


       TOBACCO CONTROL ACCOMPLISHMENTS AND TOBACCO TAX PARITY ACT

  Mr. DURBIN. Mr. President, last week I was joined by Senators 
Lautenberg and Blumenthal to introduce the Tobacco Tax Parity Act, a 
bill aimed at closing loopholes in how tobacco products are taxed and 
reducing the incidence of tobacco use.
  It wasn't that long ago when it was common to smoke in offices, 
airplanes, elevators or even here in congressional hearings. We have 
made progress since the landmark 1964 Surgeon General's Report showing 
the negative effects of smoking on health, but there are plenty of 
signs that the fight continues to protect future generations from 
suffering the terrible effects of tobacco.
  According to a Surgeon General's Report issued in March 2012, tobacco 
use among youth is a ``pediatric epidemic'' and is the No. 1 cause of 
preventable and premature death in this country. Every year, tobacco 
products account for 443,000--or 1 out of 5--deaths. The report also 
found that every day, 1,000 young people become new regular smokers 
and, of these new smokers, one-third will eventually die from tobacco-
related causes.
  While our Nation pays the physical and financial burden of tobacco 
use through $96 billion in annual medical costs and $97 billion in lost 
productivity due to premature death, tobacco companies invent new ways 
to generate profits and entice young people to pick up this deadly 
habit.
  In 2009, the Children's Health Insurance Program Reauthorization Act 
increased the Federal tax rate on cigarettes and set the tax rate for 
small cigars and roll-your-own cigarettes at the same level as 
cigarettes. Cigars, smokeless tobacco, pipe tobacco, and nicotine 
candies, however, remain at dramatically lower tax rates than 
cigarettes making them a cheap source of tobacco, particularly among 
young people. While cigarettes, roll-your-own, and little cigars are 
taxed about $1 for a pack of 20 cigarettes, pipe tobacco is only taxed 
11 cents for what adds up to 20 cigarettes, a pouch of chewing tobacco 
is only taxed 9 cents, and a 12-pack can of nicotine tablets or 
lozenges is taxed less than 1 cent. Not surprisingly, as the tax for 
cigarettes has increased, cigarette sales dropped and the sales of 
undertaxed tobacco products went up.
  This difference in tax rates doesn't make sense, and we are already 
seeing tobacco manufacturers abusing them by changing the labels on 
their products to avoid paying the higher tax. For instance, to avoid 
paying the higher tax on loose roll-your-own tobacco, some 
manufacturers simply change the label on that product to pipe tobacco. 
There are stores popping up across the country, including in Illinois, 
that allow people to buy undertaxed pipe tobacco or cigarette tobacco 
intentionally mislabeled as pipe tobacco and rent time on a cigarette 
making machine where customers can make 200 cigarettes in 8 minutes and 
not pay the $10 Federal cigarette tax.
  A report released by the Government Accountability Office last year 
found that the difference in tax rates creates opportunities for tax 
avoidance and encourages consumers to use products with a lower tax. 
For instance, the monthly sales of pipe tobacco in September 2011 
increased by over 1,200 percent compared to January 2009, while the 
monthly sales for roll-your-own tobacco dropped 600 percent. Over $1.4 
billion in State and Federal revenue has already been lost due to 
manufacturers relabeling and selling roll-your-own tobacco as pipe 
tobacco.
  The Tobacco Tax Equity Act will end the exploitation of these tax 
loopholes by taxing all tobacco products at the same level as 
cigarettes. Through this legislation roll-your-own tobacco and pipe 
tobacco would be taxed at the same level of $1 for 20 cigarettes worth 
of tobacco. It would also raise the tax on a package of smokeless 
tobacco from 11 cents or less to $1--the same as a packet of 
cigarettes. The same goes for cigars, which are currently taxed no more 
than 46 cents per a cigar. As new tobacco products come onto the 
market, this bill ensures that any product defined as a tobacco product 
by the FDA is taxed at a level equivalent with cigarettes.
  According to an estimate by the Joint Committee on Taxation, closing 
these loopholes will generate $3.6 billion over the next 10 years. But 
closing the loophole will not only generate much needed revenue and 
prevent manufacturers from gaming the system, it will protect children 
and teens from picking up this dangerous habit. I urge my colleagues to 
support this important legislation.

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