New Mexico Tobacco Tax Increase Clears First Committee

A bill that would increase New Mexico’s tax rate on cigars from 25 to 76 percent of the wholesale price cleared its first committee last Wednesday, with the Senate Education Committee advancing it along the legislative process by a vote of 4-2.

It would be a significant impact to the cost of cigars in the state; by halfwheel estimates, a cigar that has an MSRP of $9.50 would jump from $11.88 to $16.72 before any additional sales taxes are added. It would catapult New Mexico to the top of the list of states with high tobacco taxes, as if the bill passes the state would have the second highest uncapped cigar tax in the country behind Utah, which taxes tobacco products other than cigarettes at a rate of 86 percent of the wholesale price. All other states with higher tax rates have placed caps on just how much tax can be levied, most in the 50- to 75-cent per cigar range.

The bill, S.B. 25 also seeks a $1.50 increase on the cigarette tax, which would take it from $1.66 to $3.16 per 20-count pack. It is the second time that Sen. Howie Morales, D-Silver City, has sought such an increase; last year’s version was defeated by the New Mexico House Taxation and Revenue Committee.

It now heads to the Senate Corporations & Transportation Committee. If it ends up passing through the entire legislative process, the increase would go into effect on July 1.