At 7pm Eastern tonight, the Senate Finance Committee is considering the reauthorization of the State Children’s Health Insurance Program for 2007. As part of financing the program, the Senate is considering large increases in tobacco taxes. The hardest hit tobacco product? Cigars.
Currently, federal law caps cigar taxation at 4.8 cents per cigar. Under the proposed legislation, that tax would be raised to 53.13%, with a maximum of $10 per cigar, a raise of up to 20,000% for the most expensive cigars.
For example, under current law, the price of a $5 cigar, after taxes, is $0.048. Under the new law, that tax would be $2.50–a roughly 5200% increase. Not to mention the fact that as prices go higher, the taxes get steadily worse, running the risk of putting some cigar manufacturers and importers out of business.
Naturally, the cigar industry is dumbfounded by this proposal.
Norm Sharp, president of the Cigar Association of America, was dumbfounded when the legislation went public Friday.
“I thought there was a typo. I thought they meant 10 cents per cigar, not $10 per cigar. I was stunned like everyone else,” Sharp said.
Sharp’s organization represents 66 members, including Newman, Altadis and Jacksonville’s Swisher International, the global company that makes Swisher Sweets.
The association has lobbied to exclude cigars from the bill, but bristles at the public relations challenge: How do you oppose a sin tax Congress has rigged to help sick kids?
Speaking as a casual cigar smoker–I have five or six a month–this strikes me as being pretty outrageous. Regardless of the merits of the SCHIP program, it seems pretty stupid to earmark it to one particular kind of tax, especially a tax so onerous that the economic viability of the product itself is put into jeopardy. Given that cigars are a product enjoyed by most people on occasion, rather than frequently, the price increase will probably simply just incline people to do without.
(link via Cigar Jack)
