Eric Newman punches the numbers on his calculator and gapes at the results one more time.
It’s no mathematical error: The federal government has proposed raising taxes on premium cigars, the kind Newman’s family has been rolling for decades in Ybor City, by as much as 20,000 percent.
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 to as much as $10 per cigar.
As usual, it’s for The Children. And as usual, it’s idiotic.
Here’s the source of the controversy: The Democrat controlled Congress has sought an extra $35-billion to $50-billion for the state children’s health insurance program. The program distributes payments to the states to help buy coverage for kids not poor enough for Medicaid.
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 operates under a 4.8 cents-per-cigar tax cap.
Under the proposed bill, taxes on “large cigars,” a category that includes all but the tiny cigars sold in 20 packs 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.
If the tax passed, it would destroy the cigar industry in the US. I suppose you could still buy online and get around the tax, but cigar stores would be gone. And the government wouldn’t get the nickel it’s getting on each cigar now. Jobs would be gone and the tax revenues would fall off, but I’m sure some Congressional aide would feel good knowing he snuck in the largest single tax increase in human history.
Fortunately, the president is planning on vetoing the bill. Not because it would tax cigars out of existence, but because it contains other provisisions that he opposes.
Update: Re buying online to get around the tax: Bad idea.