Michigan House Approves Permanent 50-Cent Cap on Cigar Tax

On Tuesday, the Michigan House of Representatives voted to approve a permanent extension to the 50-cent cap on the state’s cigar tax, a move that could save cigar smokers in the state a significant amount of money.

While the cap has been in place since November 2012, it has been extended several times but is currently set to expire in November. There have been other attempts to extend it permanently; in 2018 a similar bill reached the desk of former Gov. Rick Snyder, though he vetoed the legislation. In the 2020 session, a bill was proposed to raise the cap to 65 cents and 75 cents in subsequent years, though failed to advance in the House after being passed by the Senate.

The cap has been a welcome reprieve for cigar smokers, as the state’s full tax rate on cigars is 32 percent of the wholesale price. That means that a cigar with an MSRP of $9.50 would cost $12.54 without the cap by halfwheel estimates. With the 50-cent cap in place, that same cigar costs just $10.50, again by halfwheel estimates, and before any sales taxes are added.

HB 4485 passed by a vote of 83-25, with two members not voting. The bill now heads to the Senate for that chamber’s debate and possible passage.