A new legislative proposal could lead to a significant increase in federal taxes on premium cigars and other tobacco products, with some taxes rising by nearly 1,000 percent. However, the likelihood of these bills becoming law remains slim.
Familiar Legislation, Low Chances of Passing
The language in these newly announced bills is not new; it has been previously introduced by various Democratic lawmakers in consecutive congressional sessions. Even when Democrats controlled Congress, similar proposals failed to pass. Given the current Republican majority, these bills stand little chance of advancing.
Titled the “End Tobacco Loopholes Act,” this proposal appears to be a rebranded version of previous bills such as “The Tobacco Tax Equity Act” and the MOMMA’s Act. The bills aim to significantly increase federal taxes on tobacco products, including:
- Doubling the tax on cigarettes
- Imposing new taxes on e-cigarettes
- Doubling the tax on roll-your-own tobacco
- Increasing the tax on pipe tobacco by over 16 times
- Doubling the tax on small cigars
- Substantial tax hikes on large and premium cigars
Major Tax Changes for Large Cigars
Under current regulations, large cigars are taxed at 52.75 percent of the import price, with a cap of 40.26 cents per cigar. The proposed bill would switch to a weight-based tax of $49.56 per pound, with a minimum tax of 10.066 cents per cigar.
Based on halfwheel’s cigar measurements, the estimated tax impact per cigar size would be:
- Robusto (5 x 50, 13.19g): $1.44
- Toro (6 x 50, 15.58g): $1.70
- Gordo (6 x 60, 22.55g): $2.46
Larger cigars would be taxed at even higher rates due to their increased weight. This shift would mark a substantial increase from the current 40.26 cents per cigar tax. Since federal excise taxes are applied at the point of import, retailers would likely pass on the increased costs to consumers. For instance, a robusto cigar with a current MSRP of $9.50 could see its price rise to $11.57 after taxes.
Lawmakers’ Justification and Support
The bill’s sponsors argue that higher taxes will deter youth tobacco use and improve public health.
“Big Tobacco’s deadly profit scheme relies on addicting children,” said Sen. Dick Durbin (D-Ill.) in a press release. “Our most effective strategy to reduce smoking and prevent a new generation from becoming addicted is to price these dangerous tobacco products out of the reach of children. But federal law has not been updated in 16 years, creating loopholes that Big Tobacco has used to hook kids. The End Tobacco Loopholes Act would help reduce tobacco and e-cigarette use, save billions in health care costs, and improve the health of children for generations to come.”
Bill Sponsors
The legislation has been announced with the backing of several Democratic lawmakers, including:
- Sen. Richard Blumenthal (D-Conn.)
- Sen. Dick Durbin (D-Ill.)
- Rep. Raja Krishnamoorthi (D-Ill.)
- Sen. Ed Markey (D-Mass.)
- Sen. Jeff Merkley (D-Ore.)
- Sen. Patty Murray (D-Wash.)
- Sen. Jack Reed (D-R.I.)
- Sen. Ron Wyden (D-Ore.)
Despite being announced, it appears the bills have yet to be formally introduced in Congress.