Premium Cigars Removed From Proposed Federal Tobacco Tax

A proposed change to how tobacco products are taxed appears to be moving forward without any changes to how cigars are taxed at the federal level.

Last month, Rep. Tom Suozzi, D-N.Y., and Rep. Peter King, R-N.Y., introduced H.R. 4425, a bill that would have overhauled how tobacco products are taxed, most notably introducing federal taxes for vaping and e-cigarette products. That bill also would have changed how other tobacco products are taxed, including cigars.

Last week, the two representatives introduced a new bill, H.R. 4742, which includes the new taxes for vaping and e-cigarette products but does not change the taxes for other tobacco products like cigars. Research done as part of the proposal indicates the tax on vaping products alone would generate over $1 billion annually.

The move is seen as a sign that the representatives will now focus on the bill that just adds the vaping taxes, though H.R. 4425 is not formally dead.

“The change in direction prior to the Committee mark-up, specifically excluding any new taxes on premium cigars and pipe tobacco, demonstrates the importance of continuous advocacy and education about our industry,” said Joshua Habursky, federal affairs director for the Premium Cigar Association, in a press release. “And this is why we are continuing to build out or education programs that directly target members of Congress as well as administrative bodies.”

H.R. 4425 could have more than tripled the taxes on cigars. Currently, cigars are taxed at 52.75 percent of their wholesale price, capped at 40.26 cents per cigar. The bill would have changed the tax to $73.85 per pound, which would have likely equated to around $1.48 per cigar.

A similar bill was also filed in the Senate. Last month, Sen. Dick Durbin, D-Ill., introduced the Tobacco Tax Equity Act Of 2019, which would have increased the tax to just under $1.00.

Scott Pearce, executive director of PCA, told halfwheel that the organization was working with Senate committees to have the language removed on the Senate side.