CHIP Expires, Cigar Tax Remains in Effect

Oct. 1 marks the start of the new federal fiscal year and one major government program is without new funding.

Funding for the Children’s Health Insurance Program (CHIP), once known as SCHIP, has not been extended by Congress. The program, which provides federal funding to states to ensure all children are able to receive basic healthcare, is known for something else by many cigar smokers.

A federal excise tax of 52.75 percent, capped at 40.26 per cigar, is imposed on every cigar imported to the U.S. to help fund the CHIP program. The CHIP-related tax went into effect in April 2009 and also increased the federal tax on cigarettes from 39 cents to $1 per pack.

Despite the expiring of CHIP funding, the tax on cigars remains in effect.

“Tax itself is statute,” said Daniel Trope, director of federal government affairs for the International Premium Cigar and Pipe Retailers Association (IPCPR), in a text message to halfwheel. “If anything, (the money will) just go to general treasury but the tax remains in perpetuity.”

While CHIP may not have funding for 2018, it still has funds in reserve that should allow all but three states and the District of Columbia to continue to offer services until the end of the year, though over half the states will be out of money sometime in the first three months of next year.

Charlie Minato

I am an editor and co-founder of halfwheel.com/Rueda Media, LLC. I previously co-founded and published TheCigarFeed, one of the two predecessors of halfwheel. I have written about the cigar industry for more than a decade, covering everything from product launches to regulation to M&A. In addition, I handle a lot of the behind-the-scenes stuff here at halfwheel. I enjoy playing tennis, watching boxing, falling asleep to the Le Mans 24, wearing sweatshirts year-round and eating gyros. echte liebe.