California Tobacco Tax Hike Proposal Stalls in Senate

Last week, the California Senate did not renew SB-591, the California Tobacco Tax Act of 2015, meaning the bill is dead, although the proposal could be coming back for the 2016 session in the form of a new bill.

The proposal would have raised the tax on cigarettes from 87 cents per pack to $2. This is relevant for cigar smokers, because the California state tax for other tobacco, including cigars, is based on the rate in which cigarettes are taxed. The Board of Equalization divides the tax rate per cigarette—currently 4.35 cents—by the average wholesale cost per cigarette. This rate changes each year, it currently is 28.13 percent of the wholesale cost and has stayed around 30 percent since 2011.

In 2013, the Board of Equalization estimated that if the cigarette tax was raised to $2 per pack, the tax on other tobacco products, including cigars, would more than double, to 67.41 percent of the wholesale price.

A cigar with an MSRP of $9.50 likely retails for around $12 in the state currently, that price would increase to almost $16 with the added taxes.

Under Joint Rule 56, bills proposed in the previous year have until Jan. 31 of the following year to be renewed under a carryover provision. SB-591 is technically dead, although a new bill could be proposed between now and Feb. 19, the date in which new bills will be introduced in California.

A similar measure was proposed in a special session late last year, SB-591’s death has no effect on that piece of legislation.