$10 Cigar Tax!

July 18, 2007

Cigarmakers and their customers are in a panic over a proposal to raise the federal tax on cigars -- now a nickel -- to as much as $10.

Congress -- meeting in smoke-free rooms -- is looking for an extra $35 billion to $50 billion for the state children's health insurance program and hopes to raise most of it 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 cigars would not escape.

There is currently 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 version of the bill being considered by the Senate 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, according to the St. Petersburg Times. "They had the Boston Tea Party for less than this."

Others were equally befogged.

"I thought there was a typo. I thought they meant 10 cents per cigar, not $10 per cigar, said Norm Sharp, president of the Cigar Association of America, the Times reported.

Of course, cigar sales are just the merest wisp of the cigarette market. In 2006, Americans bought nearly 400 billion cigarettes and only 5.3 billion cigars