NCPA - National Center for Policy Analysis


July 18, 2007

As part of an increase in tobacco taxes designed to pay for children's health insurance, the nickel-per-cigar tax that has ruled the industry could rise by as much as 20,000 percent, says the St. Petersburg Times.


  • The Democratic controlled Congress has sought an extra $35 billion to $50 billion for the state children's health insurance program, through excise taxes on products like tobacco.
  • Cigarettes, which accounted for more than 95 percent of tobacco tax collections last year, are the main focus of the bill -- federal taxes on a pack would jump from 39 cents to $1.

But the legislation has dragged cigars along for the ride:

  • The industry currently operates under a 4.8 cents-per-cigar tax cap, but under the proposed bill, taxes on "large cigars," a category that includes all but the tiny cigars sold in packs of 20 like cigarettes, would rise to 53 percent.
  • A U.S. Senate version of the bill under consideration today in the Finance Committee sets the maximum tax per cigar at $10.

"I'm not sure in the history of man, since our forefathers founded the country in 1776, that there's ever been a tax increase of 20,000 percent," said Eric Newman, who runs a Tampa cigar shop. "They had the Boston Tea Party for less than this."

Others were equally dumbfounded.  "I thought there was a typo. I thought they meant 10 cents per cigar, not $10 per cigar. I was stunned like everyone else," said Norm Sharp, president of the Cigar Association of America.

When it comes to tobacco sales, cigars are just a speck compared to cigarettes. In 2006, the nearly 400-billion cigarettes sold domestically dwarfed the 5.3-billion cigars.

Source: James Thorner, "Cigarmakers in a panic," St. Petersburg Times, July 17, 2007.

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