New Bill Would More Than Triple Federal Taxes for Cigars

A new bill aimed at increasing care for expecting mothers and those who have recently given birth would also introduce massive federal tax hikes to tobacco products, including cigars.

That new bill, the CARE For Moms Act, is an extension of the Mothers and Offspring Mortality & Morbidity Awareness (MOMMA) Act that was introduced in previous sessions of Congress. Portions of that bill have already been enacted, but the MOMMA Act also included anti-tobacco language that had nothing to do with expectant mothers.

That language was copied and pasted from another bill—the Tobacco Tax Equity Act—and is now part of this new bill, the CARE for Moms Act. It includes:

• New taxes for e-cigarettes;
• Doubling the tax on roll-your-own tobacco;
• A more than 16x increase on pipe tobacco;
• Doubling the tax on small cigars;
• A massive tax hike for premium cigars;

For premium cigars, the language removes the existing federal excise tax of 52.75 percent, capped at 40.26 cents per cigar, and replaces it with a weight-based tax of $49.56 per pound.

Because it’s a weight-based tax, the difference between the existing tax and the new taxes would vary depending on how heavy the cigar is. For cigars robusto or larger, it would likely more than triple the current federal tax rate. halfwheel estimates that this new weight-based tax would equate to:

• Robusto (5 x 50) (average weight: 12.54 grams)
  • Currently: up to 40.26 per cigar
  • If Bill Passes: $1.37 per cigar
  • 240.29 percent increase
• Toro (6 x 52) (average weight: 16.47 grams)
  • Currently: up to 40.26 cents per cigar
  • If Bill Passes: $1.80 per cigar
  • 347.1 percent increase
• Gordo (6 x 60) (average weight: 22.05 grams)
  • Currently: up to 40.26 cents per cigar
  • If Bill Passes: $2.41 per cigar
  • 498.6 percent increase

The larger the cigar, the heavier it likely is, meaning that those cigars would pay more in taxes.

Those taxes would be the price paid by the manufacturers. In the status quo, the excise tax is built into the wholesale cost of the cigar and retailers then mark it up, usually doubling their wholesale cost. In states with added taxes, the impact of the taxes would get worse as the state tax is based on the wholesale price paid by the retailer, meaning that a federal tax increase would increase the basis upon which the state tax is paid.

For example, if a robusto cigar has a current MSRP of $9.50 per cigar, the federal excise tax paid is likely 40.26 cents per cigar. In a state like Florida—with no state cigar tax—the price before sales tax is likely $9.50, of which 80.5 cents might be directly due to the federal excise tax. If CARE For Moms Act was enacted, that would likely increase to $11.43 per halfwheel estimates and the direct impact of the federal tax would be $2.74.

In a state like Nebraska—which has a 20 percent tax on the wholesale cost of cigars—currently, that same cigar likely costs around $10.45 before sales tax. If the CARE For Moms Act was enacted, halfwheel estimates that it would increase to $14.42. The increases would be more dramatic in states with higher wholesale taxes and/or on larger cigars.

The CARE For Moms Act was introduced by Sen. Dick Durbin, D-Ill., a staunch critic of tobacco who also introduced the Tobacco Tax Equity Act. In the House, Rep. Robin Kelly, D-Ill., has introduced the bill. Durbin and Kelly also introduced the MOMMA Act in a previous session of Congress.

Neither Durbin nor Kelly mentioned tobacco in their press releases announcing the bill.

“Routinely, the Illinois Congressional delegation with Rep. Kelly in the House and Senator Durbin in the Senate keep inserting these outlandish tax measures in a variety of pieces of legislation,” said Scott Pearce, executive director of the Premium Cigar Association (PCA), in a press release. “At the end of the day, this tobacco tax equity bill hikes all tobacco product taxes and puts premium cigars and pipe tobacco at the same rate. We fundamentally oppose any of these attempts.”

The PCA has asked its members to contact their local members of Congress to oppose the bill.

“Addressing maternal health and providing access to programs and resources to mothers and babies is a fundamental issue that merits attention,” said Mike Copperman, director of Legislative & Regulatory Affairs at Cigar Rights America, in a statement. “However, prescribing massive tax increases on premium cigars and other tobacco products is not the way to achieve this, as it would result in considerable harm towards our legal, hand made, products and thus, CRA fundamentally opposes this bill in its current form.”

Featured Image By Scrumshus (Own work) [Public domain], via Wikimedia Commons

Update (Sept. 22, 2023) — Added quote from Mike Copperman of CRA.

Update (Sept. 30, 2023) — An earlier version of this article incorrectly referred to the weights of cigars in ounces not grams.

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.