Loophole in tobacco tax causes huge losses to U.S

The U.S suffered huge losses of more than $250 million last year due to a loophole left in the tobacco tax under the program of President Barack Obama’s children’s health insurance.

It was due to the loophole that companies were successful in avoiding huge tax payments. The tax was imposed on loose rolling tobacco as these products were relabeled as pipe tobacco. Due to this marketing twist, the companies pay only $2.83 per pound, while they were expected to pay $24.78 per pound.

As a result, the tobacco companies focused on production of pipe tobacco and increased its output to manifold. They curtailed production of roll-your-own tobacco. With the tax loophole continuing, production of pipe tobacco soared in March to 270,000 pounds a month and U.S lost more than $250 million