A bill introduced in the Maine House of Representatives would double the state’s taxes on all tobacco products, taxing cigars at a rate of 86 percent of the wholesale price.
Last week, Rep. Joyce McCreight, D-Harpswell, introduced H.P. 1039, which seeks to double the state’s tax on cigarettes from $2 per pack of 20 to $4. Because of a 2019 bill sponsored by McCreight that was passed, the doubling of the state’s cigarette tax would mean that the tax on other tobacco products—which includes cigars—would double from its current 43 percent of the wholesale price to 86 percent of the wholesale price.
Language in the 2019 bill makes it clear that all future cigarette tax increases would mean an equivalent change for the taxes on other tobacco products:
5. Equivalence. If the tax on cigarettes under chapter 703 is increased after January 2, 2020, the assessor shall calculate a rate of tax on other tobacco products under subsections 1 and 2 that is equivalent to the same percentage change in the tax rate for one cigarette. The adjusted rates calculated by the assessor take effect at the same time as the increase in the tax on cigarettes.
If passed, the bill would take effect on Nov. 1, 2021.
Currently, a cigar with an MSRP of $9.50 likely costs $13.59 before sales tax in Maine. If H.P. 1039 passes, that price would jump to $17.67 before sales tax per halfwheel estimates. As of Jan. 1, 2020, Maine’s tax rate on cigars was 20 percent of the wholesale price.
At 86 percent of the wholesale price without a tax cap, Maine’s tax rate would be tied with Utah for the highest in the country.
Currently, there are eight other co-sponsors to the bill, which has been referred to the House Committee on Taxation for debate.