Health Advocates Call For Changes In Cigar Tax

Public health advocates in the US are trying to curb cigar and cigarillo use, especially among young people, by campaigning to have these products taxed at the same rate as cigarettes; currently the Federal excise tax on cigarettes is 39 cents per pack of 20 pieces compared with the cigar excise tax of a maximum of five cents per piece. Little cigars, which are equivalent to the size of cigarettes and are also sold in packs of 20 pieces are taxed at 4 cents per pack. The US Treasury Department’s Alcohol and Tobacco Tax and Trade Bureau defines cigars as any roll of tobacco wrapped in tobacco leaf or a substance containing tobacco. Debra Annand, director of health education services for the American Lung Association, said many young people do not perceive the consumption of flavored cigarillos as smoking, and Federal regulations define cigars in a way that allows manufacturers to avoid the higher taxes imposed on cigarettes. The Cigar Association of America estimates that per capita consumption of cigars has more than doubled since 1990. The Campaign for Tobacco-Free Kids estimates that consumption of little cigars, which resemble cigarettes except in color, has increased 154% between 1998 and 2006. The group also wants States to tax all tobacco products to bring them in line with cigarette taxes. Art Resnick, a spokesman for the Treasury Department’s tobacco tax bureau, said it is reviewing public comments and considering possible changes to the definition of little cigars since the National Association of Attorneys General said manufacturers are essentially disguising cigarettes as cigars to take advantage of the tax difference. AS for the flavorings used in cigars, Norman Sharp of the Cigar Association said they go back to the 1500s, and in the 1600s people in the Netherlands smoked tobacco flavored with lavender, rosemary, nutmeg and coriander (Washington Post 11/4). 

As I think of the affect this will have on my business I wonder what retailers, smokers or other manufacturers think about this possibility?

Are you a little cigar smoker? Why do you smoke little cigars? Were you a cigarette smoker?
If your a retailer what affect do you think a change this drastic will mean to your business?
Do you think cigar smoking is as bad as smoking cigarettes. Do you think the premium sector of the cigar business should be taxed the same? And what about the thought of all tobacco being taxed the same? I have heard some encourage that tobacco products should be taxed as it relates to it’s harm level. What are your thoughts? I’d like to know!

29 comments ↓

#1 The OTP Kid on 11.20.08 at 1:31 PM

While no tobacco taxes are ever a good thing, the cigar business has been enjoying an unfair advantage forever. Little cigars are being sold as cigarettes, and should be taxed as such. The cigarillos, blunt wraps and blunts should all be taxed at around 50 cents each. If people want to buy them for other uses, they will pay a higher price.

#2 Bill Godshall on 11.20.08 at 6:54 PM

Smokefree Pennsylvania (my organzation) also has been advocating for the reclassification of little cigars (20/pack) as cigarettes.

But while CTFK, ACS, AHA, ALA want to tax (at the state level) all other OTP (cigars, smokeless and smoking tobacco)at the same level (as a % of price) as cigarettes, and they want all OTP to be taxed ad valorum (as a % of price).

In contrast, we’ve been advocating a significantly lower tax rate for cigars and smokeless (haven’t given much thought to RYO and pipe tobacco) than for cigarettes (because cigars and smokeless pose lower health risks), and we support taxing cigars by the piece and smokeless by weight (as a $.50 cigar is just as hazardous as a $15 cigar, and a $1.50 can of snuff is as hazardous as a $5 can of snuff).

The Federal Excise Tax (FET) is a good model (at least for cigarettes and moist snuff), as cigarettes are taxed at a significantly higher level ($.39/pack) than snuff (@$.06/can).

The SCHIP legislation would increase the federal cigarette tax to $1/pack and snuff tax to @$.15/can, which should encourage even more cigarette smokers to switch to less hazardous snuff (or to use as an alternative to cigarettes).

#3 kentucky rebel on 11.24.08 at 3:09 AM

Bill,

I thought the FET tax could be passed with out the SCHIP legislation? I think it makes a lot more sense to tax other things for health care. Pretty crazy to tax a product deemed hazardous to fund health care. Plus I read where as taxes go up higher in states that it forces sales to go to other states. As a federal tax goes up it will only force folks to buy the product thru other means. I mean look at Canada. Thirthy percent of their volume is illegal!

I expect to see the manufacturers to pass a increase along in the very near future to off set increasing costs and decreasing volumes.

#4 kentucky rebel on 11.24.08 at 3:11 AM

I agree with the OTP kid – little cigars are just a way of folks getting around the taxes. Retailers love them also as they can make more profit on them a pack of cigarettes.

#5 Bill Godshall on 11.24.08 at 2:03 PM

Per kentucky rebel’s comment, it makes far greater sense to earmark cigarette and other tobacco tax revenue (and alcohol tax revenue) to fund healthcare services than to earmark income, property or other tax revenues for healthcare.

#6 kentucky rebel on 11.24.08 at 2:13 PM

Yeah, Bill but what is the tax on alcohol? How many folks drink compared to smoke? Would there be more revenue raised if the tax was on a bottle of beer? Class of wine?
Shot of tequila?

#7 Bill Godshall on 11.25.08 at 12:28 PM

Alcohol tax rates vary greatly from state to state. Interestingly, southern states have significantly higher alcohol tax rates than northern states (while northern states have much higher cigarette tax rates than southern states).

Here in PA, the beer tax has been $.01/pint since 1946, which has declined by more than 90% over the past 60 years (due to inflation).

If PA increased to the beer tax to $.10/pint (which I’ve been urging the governor and state legislature to enact)
it would generate an additional $250 million/year in additional state revenue. The Governator recently proposed a $.05/drink tax in CA.

Regardless, cigarette tax increases (which I’ve also been advocating) are very likely next year at the federal level, and in many states.

#8 Smoking Joe Camel on 11.25.08 at 12:58 PM

Well, I must say there is an untapped stream of income in Pa by raising the beer tax!

#9 West Coast Guy on 11.25.08 at 5:33 PM

Hey, while we are at it, let’s tax snack foods out of existence! Taxing Beer and Snack Foods will cut consumption and eliminate gastro bypass surgeries!

#10 The OTP Kid on 11.26.08 at 10:15 AM

Listen up people, Bill is an advocate for particular taxes against a product he has no use for, and the end game with him is the elimination of tobacco entirely – so let’s stop providing him with this status he likes to think he has as an all-knowing authority on the matter. If he cared about funding healthcare, he would look at alcohol, or better yet, products that contribute to childhood obesity and type 2 diabetes.

It’s best if we all ignore his rants and hope he find a real job.

#11 Bill Godshall on 11.26.08 at 1:27 PM

On the first comment on this thread, the OTP Kid advocates the same tax rate for little cigars and cigarettes, and a tax rate at $.50/cigar for other cigars(both of which I support).

But OTP Kid’s most recent comment defames me and inaccurately states that my end game goal is “elimination of tobacco entirely”.

If that was my end game, I wouldn’t be the most outspoken advocate (within the public health community) of tobacco harm reduction products and policies, nor would I be the most outspoken opponent of tobacco prohibition policies (including backdoor prohibition policies) that are advocated by many anti tobacco extremists.

BTW, I also campaigned to enact the Allegheny County (i.e. greater Pittsburgh) 10% alcohol drinks tax last year, which was approved by County Council, and which will generate about $40 million in additional county revenue this year.

#12 The OTP Kid on 11.26.08 at 5:51 PM

Bill, I don’t mean to “defame” you, just aim to point out your perspective. So would it be correct to say you want to tax everything, or at least everything to encourage particular behaviors you want to encourage?

#13 kentucky rebel on 11.27.08 at 12:05 AM

I still think more taxes on alcohol would be a better way to raise revenue!

#14 CIG GUY on 11.27.08 at 11:52 PM

I’m wondering how the concept of taxing tobacco got started. Can anyone provide me with the information?

#15 Bill Godshall on 12.01.08 at 2:53 PM

One of the first capitalists, John Stuart Mills, advocated taxing tobacco and other products that cause harm.

I support taxing hazardous products at a level that reimburses the government for the cost of services it renders to deal with those hazards (e.g. healthcare costs to treat smoking diseases, fire fighting costs for cigarette caused fires).

I also support decriminalizing and taxing gambling, prostitution and illegal drugs.

Doing so would generate significant government revenue so that property, income and business taxes could be reduced.

#16 BIG MO on 12.01.08 at 11:55 PM

Wow! Bill, I wonder which of the three vices don’t have an affect on the core values of the family?

#17 The OTP Kid on 12.02.08 at 11:24 AM

How about taxing condoms Bill? That way each time someone used one they could get screwed twice!

#18 Copenhagen Charlie on 12.02.08 at 9:35 PM

Hey OTP KID – shucks thats the last thing we need is for condoms to become illegally trafficked and having cheapo condoms out in the marketplace.

#19 Copenhagen Charlie on 12.02.08 at 9:37 PM

By the way, I am a Copenhagen user and I’ll pay a FAIR share but I don’t get why we don’t tax stuff like bottled water. Look at the harm all that plastic is doing to the environment!

#20 Smoker Babe on 12.02.08 at 10:35 PM

The government will continue to tax tobacco since folks that use tobacco products are in the minority. Its easy to tax these products rather than others that also present harm to the user are consumed by a majority of the people. It’s that easy!

#21 jancascade on 12.07.08 at 10:55 PM

I see the effort to tax small cigars as cigarettes as just another tax grab from the greedy.

Cigarette smokers do not like the small cigars at all. Hell would freeze over before a Camel or Marlboro smoker would smoke a little cigar. I am a retailer, I deal with smokers all day long.

Small cigars have thier market and their following, but they are not former cigarette smokers. Cigarette smokers will go down to a lower priced cigarette and only buy thier brand once in awhile, but they do not choose small cigars to replace their brands, no matter how much less the price.

#22 Jersey Kid on 12.17.08 at 6:37 PM

The debate centered around what is a cigar and what is a cigarette will center on the following considerations:
Any tobacco product that has one seam will be considered a cigarette, regardless of the color of the
wrapper or size of the product.
Any tobacco product that has a spiral wrapper will
be considered a cigar.
History should be also taken into consideration;
and smoker perspection is also to be considered.
The chemical makeup of the tobacco itself
should be considered.
Our lawmakers will have to be educated on
all of the above if they are to make a wise
decision that affects the taxation of these products.
OTP Kid, your opening comment that the cigar business has enjoyed an “unfair advantage” is questionable.
How do you compare a Million Dollar Business (cigars)to a Billion Dollar Business (cigarettes) and say there is an “unfair advantage”? Just read the last entry written
by “jancascade”; she is obviously at the POS and reports that the cigarette smoker does not like
small cigars. Now, we all know there is some crossover.
However, crossover exists more freqently with the
cigarette smoker going to the moist snuff category.
Again, OTP Kid, I believe you are comparing “apples to oranges”, and is never a good thing.

#23 jancascade on 12.21.08 at 10:34 PM

This editorial was in our newspaper today:

http://www.oregonlive.com/opinion/index.ssf/2008/12/camel_dissolvables_head_for_po.html

Will someone tell me how Camel Dissovables are any different than the nicotine replacement products manufactured by Johnson & Johnson. The only thing I see as different is the Camel Dissolvables will by taxed as a tobacco product, but the drug company offering that contain nicotine are not. Are J&J products any less additctive than Camel Dissolvables? Please, don’t tell me the drug companies don’t target kids with their advertising.

I love the don’t do drugs, unless your doctor writes you a prescription. How confusing that must be for kids today. A real mixed message.

#24 ... on 12.23.08 at 10:08 AM

jancascade: I beleive that the only difference is that the new Camel Dissavables contain tobacco as the drug companies are just using nicotine extract in their product????

#25 Leif Grane on 01.08.09 at 5:00 PM

The only way to be fair with all taxes is to tax all things equally (a simple sales tax at the same percentage). Unfortunately with Hussein Obama being sworn into office in only a couple of weeks, the unfair taxing is only going to get worse.

Unfortunately non-smokers (at least the stupid ones) seem to lump cigarette and cigar smokers together. While obviously there are some health risks to cigars, a couple of cigars a week not nearly as bad as smoking a couple of packs of cigarettes a day.

And Bill, I do agree that smokers while do not have the right to just light up anywhere they please, I don’t feel they deserve to be discriminated against for taxes either. We already pay sales tax on cigars, there’s no need to fund other programs (including Medicaid for illegal aliens) with cigar taxes. Maybe we could put the illegal aliens to work rolling cigars and they could pay for their own health care.

It’s just amazing how completely stupid you are with your comments. Maybe we could just expand on your idiotic beliefs and tax EVERYTHING that hurts anything. But it’s surprising to hear that you want to it to be legal for a hooker to be riding me while I’m snorting cocaine off her chest and playing a slot machine at the same time.

Why don’t you grow up and instead of attacking the smoker, protect them? Go after the cigarette manufacturers and change the laws preventing most of the chemical additives to cigarettes. Cocoa (increases the body’s ability to absorb nicotine), menthol (numbs the throat to make inhaling easier) sugar (sweetens cigarettes to make them more attractive to younger smokers), ammonia compounds (deliver nicotine faster to the body), and I could go on and on.

Why don’t you go after something that would make more sense (chemicals making cigarettes more addictive) instead of going after products that are mostly natural (cigars). If you wanted to get legislation passed increasing taxes on cigarettes with unnatural additives designed to increase addiction, I would be all for it. But for now, I will just maintain my opinion of you being a moron, although maybe the hookers would be OK… (I hope I didn’t “defame” you…)

#26 Fedup with Gvmt hypocrisy on 01.09.09 at 1:11 AM

Hey No Smoke Bill Guy – Leif Grane has some very good points!

#27 Leif Grane on 01.10.09 at 6:26 AM

Hey, Slick Willy (Bill)… No comebacks? No comments? (too stupid to click on “Notify me of followup comments via e-mail”??????)

Hypocrits like you make me sick to my stomach…

If only I could debate a gutless coward like you in public. (that would be more fun than snorting cocaine off a hooker’s tits while gambling at my local casino…)

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