Lautenberg on Tobacco Company Tax Loophole Exploitation

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Anti-Tobacco Senator Vows to Fight 'Pipe Tobacco Loophole' That Undermines Children's Health Funding

November 18, 2009 -- WASHINGTON, DC – Senator Frank R. Lautenberg (D-NJ), a longtime Senate leader in the fight against the tobacco industry, today called for reform following reports that tobacco companies are cheating taxes by exploiting a loophole in recent changes to tobacco excise taxes that were enacted to fund expansion of the Children’s Health Insurance Program (CHIP). By simply re-labeling ‘roll-your-own cigarette tobacco’ as ‘pipe tobacco,’ the industry is averting millions in excise tax payments every month.

“This is another egregious example of tobacco companies putting the bottom dollar over our children’s health,” stated Lautenberg. “It is bad enough that they are exploiting this loophole, but to make matters worse, they are cheating the government out of tax dollars needed to keep America’s children healthy. If companies won’t do what is right, then we will- by working to close this loophole.”

The Children’s Health Insurance Program (CHIP) provides health insurance for low-income children whose parents cannot afford to buy private insurance but earn too much money to qualify for Medicaid. The newly reauthorized CHIP, which Sen. Lautenberg fought to approve in the Senate, is providing coverage to an additional four million children across the nation, including more than 100,000 in New Jersey. The legislation was paid for by the increase in the federal tobacco tax.

The new CHIP law raised taxes on ‘roll-your-own’ tobacco from $1.10 to $24.78 a pound. Revenues from this increase were intended to further fund children’s health programs. Instead of paying the tax increase, some tobacco companies are re-labeling their ‘roll-your-own’ brands and marketing them instead as ‘pipe tobacco,’ which is taxed at only $2.83 per pound.

Source: Senator Frank R. Lautenberg