Excise Taxes

Reports

Big taxes don't touch little cigars:  Higher levies sought to curb popularity
A recent article in the Washington Post describes the push by health advocates to increase cigar taxes and combat a rise in the popularity of newer small cigar products. From 1998 to 2006, sales of small cigars, which are quite similar to cigarettes, increased by 154%. Youth tobacco use has declined in recent years, but cigar use has increased among young people, according to national data published in the American Journal of Health Behavior. Federal and state cigar taxes are dramatically lower than taxes for cigarettes, making cigars an affordable choice. The Federal excise tax on a pack of cigarettes is 39 cents, while cigars are taxed five cents or less, and may be sold individually at a low cost. Small cigars, which have been popular among youths, are taxed four cents a pack. The National Association of Attorneys General is in a public comment period as it reevaluates whether a distinction between little cigars and cigarettes should exist. For more information, click here.

Cherokees, state reach tobacco deal (OK)
After years of debate over Oklahoma’s state excise tax rate for cigarettes sold from the Cherokee Nation’s smoke shops, leaders from both parties have reached a compromise, signing a new compact that will set tax rates through 2013. Cigarettes will be taxed at 67 cents per pack throughout the state, which will raise cigarette taxes in areas along state borders, but tribal retailers will have an overall tax advantage over nontribal retailers to keep their sales fairly stable. In addition, tribal retailers may receive rebates if they suffer financial losses after the tax increase. Nontribal retailers will continue to be taxed $1.03 per pack. The state is in various stages of talks to reach similar agreements with other tribes. Click here for more details. Click here to download a copy of the compact.

Barbour caves on tobacco tax (MI)
As the state wrestles with multiple budgetary issues, Mississippi Governor Haley Barbour has announced that he will support a recommendation to increase the state’s tobacco tax from 18 cents—among the lowest in the country—to 42 cents. To patch holes in the state’s Medicaid budget, Gov. Barbour chose the cigarette tax increase rather than a hospital tax hike that officials feared would shut down some of the state’s hospitals. House Public Health and Human Services Committee Chairman Steve Holland expects that the House will work with Barbour to evaluate a tax increase, but criticizes the governor’s plan to allocate the increased cigarette tax revenue to the state’s general fund, rather than to healthcare programs. The governor has cited “health purposes” as one reason behind the tax increase, but Roy Mitchell, director of the Mississippi Health Advocacy Program contends that the governor should raise the tax to at least $1 for an effect on cigarette sales that would impact health. Click here for more information.

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