In 2012, Maryland raised taxes on most tobacco products, except premium cigars. Now, as the call for more anti-tobacco programs, premium cigars face a dramatic tax hike.
A new bill in the Maryland House of Delegates calls for spending on tobacco education and enforcement to increase from $6 million in 2013 to $21 million by 2016, money that will come from increased tobacco taxes.
Currently, premium cigars are taxed at 15 percent of the wholesale price. Under the proposed H.B. 443, cigars under $20 wholesale would be taxed at 95 the wholesale rate, with a cap at $3 in total taxes. Cigars over $20 wholesale would be taxed at the current rate of 15 percent without a cap.
The move would increase the price of virtually every premium cigar in the state, but would be particularly damning to cigars priced $6 and below. A cigar like the CAO La Traviata Intrepido, which should sell for around $6.80 under the current laws, would increase to $11.60 under the new law.
Higher-priced cigars like the Illusione Epernay Le Voyage, which should sell for around $28.75 under current taxes, would increase as well, but halfwheel estimates the new taxes would only increase prices to around $31.
It’s unclear where the $20 wholesale exemption came from, as the amount of cigars currently offered by manufacturers priced at more than $20 wholesale is probably less than 50.
Furthermore, many of the items that would fall in that price range carry with it a humidor tax, a distinction between the cost of the cigars and the cost of the package they come in, specifically used to limit the tax burden.
For example, the Davidoff Nicaragua Belicoso was only sold in humidors of 48 with a suggested retail priced of $3,900. However, Davidoff clarified the value of the humidor was $3,060 and the cost of the 48 cigars totaled $840, meaning it would fall well short of the $20 wholesale exemption proposed in Maryland.
The bill was introduced by Rep. Eric Luedtke, D-Montgomery, on Jan. 27. It currently has no Republican support amongst its 56 co-sponsors.