Michigan Governor Vetoes Cigar Tax Cap Extension

It may have seemed like a foregone conclusion that Michigan Gov. Rick Snyder would sign a piece of legislation making a 50-cent per cigar tax cap permanent, but instead he vetoed the idea and will keep the sunset date in place, which will lead to an increase in the cost of cigars in the state in 2021.

In a Dec. 28 letter to state legislators, Snyder said that he believes that it is appropriate to leave the cap’s current sunset date of Oct. 31, 2021 in place and then return to the rate of 32 percent of the wholesale price.

Earlier this year, both the Michigan House and Senate passed a bill that would extend the tax cap indefinitely. Given that in 2016 Snyder signed into law a change that extended the tax cap from October 2016 to October 2021, it appeared likely he would sign S.B. 304, which removed the October 2021 language, and would extend the cap indefinitely.

Currently, a cigar with an MSRP of $9.50 costs around $10.50 with the cap. Assuming that the cap expires as the law is currently written, that same cigar would increase in cost to $12.54 by halfwheel’s estimate.

It’s one of the final actions Snyder will take as governor, as his term expires Dec. 31, 2018 and he will have hit the state’s two-term limit. He will be replaced by Gretchen Whitmer, a Democrat who had served several terms in both the House and Senate and won the November 2018 election with 53.34 percent of the vote.

The Legislature may attempt to override the veto by securing a two-thirds vote of the members elected to and serving in each house. Alternately, a new bill could be introduced in a future session to achieve the same thing.