New Senate Bill To Increase Cigars And Tobacco Products

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Awwww. They gave it such a cute name.



https://halfwheel.com/senate-bill-wo...oducts/391903/


March 30, 2021•Charlie Minato
•Federal, Legislation, Taxes
Senate Bill Would Dramatically Increase Taxes on Cigars, Other Tobacco Products

A bill aimed at reducing maternal mortality introduced last month in the U.S. Senate would dramatically increase the federal excise taxes paid on tobacco products, including cigars.


S. 411, the Mothers and Offspring Mortality & Morbidity Awareness (MOMMA) Act—was introduced by Sen. Dick Durbin, D-Ill., along with eight Democratic co-sponsors and Sen. Bernie Sanders, I-Vt. The bill—which has been introduced in the previous two sessions of Congress—aims at reducing the number of mothers in America who die giving birth each year. Currently, that number is an average of 700 per year according to the bill. It will fund research and the establishment of best practices, as well increasing the length of post-partum Medicaid coverage from two months to one year.


To pay for this—and presumably creating a surplus—the bill would dramatically increase the federal excise taxes paid on tobacco products. Durbin, a longtime critic of tobacco, has included language he has previously proposed under separate bills as the Tobacco Tax Equity Act as part of the MOMMA’s Act.
It would include:

• 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 cigars, it would change the current language, which is 52.75 percent of the import price of a cigar, capped at 40.26 cents per cigar. If passed, S.411 would increase that tax to $49.56 per pound, no less than 10.066 cents per cigar.
Because the tax is based on weight, the increases would be more dramatic for larger cigars. halfwheel weighed three sizes of cigars and estimated the tax:

• Robusto (5 x 50, 15g) — $1.66
• Toro (6 x 50, 16g) — $1.78
• 7 x 70 (28g) — $3.10

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. If S.411 was enacted, that would likely increase to $12.01 per halfwheel estimates.


In a state like Nebraska—which has a 20 percent tax on the wholesale cost of cigars—currently, that same cigar likely costs around $11.40 before sales tax. If S.411 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.


Currently, the bill has been referred to the Senate Committee on Finance. The previous four MOMMA’s Act bills have received zero committee votes in either chamber. Rep. Robin Kelly, D-Ill., plans on introducing a companion bill in the House of Representatives.


If passed, the changes included in S.411 would go into effect on Dec. 31, 2021.

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