13 Jan 2009
[UPDATE: According to the IPCPR, the tax cap will be 40 cents per large cigar. Please click here for their full press release. The tax portions of the bill can be downloaded here (pdf) and the full bill can be downloaded here (285 page pdf).]
Well, it looks like today we’ll all finally learn just what the new federal tax will be on cigars. No more speculation and rumor. The facts will be laid out in the bill to reauthorize the 11-year-old State Children’s Health Insurance Program (SCHIP), which is slated for a vote in the House of Representatives Wednesday or Thursday.
Federal budget crunchers were working the numbers Monday, trying to see if everything adds up. Apparently, the increased tax revenue—largely from a cigarette tax boost—isn’t now sufficient to expand and fund a five-year plan. So, there’s consideration of shortening the time frame and coming back again in a few years.
As I write this Monday night, the final SCHIP bill hasn’t been released. It’s anticipated this morning, and the first place you’re likely to find it is on the House Rules Committee site or on Thomas.gov. Groups involved with tobacco, such as the IPCPR and the National Association of Tobacco Outlets, will also be on top of it.
For most of you reading this, the heart of the issue is what happens with large cigars, the category that includes premium sticks. One provision that could have devastated small cigar shops, a floor tax on inventory, has been shelved. And the plan to boost the cap on individual cigars—currently about a nickel—appears also to have been scaled back.
When President Bush vetoed the previous SCHIP bill, the cap was $3. There has been intense lobbying to push it down more. A few weeks ago, a number of reports put the cap proposal at $1. Over the weekend, a couple of retail shop owners told me they’d heard the cap would be 40-45 cents. A GOP staffer on the Hill told Patrick S on Monday that he was hearing cap figures between 39 cents and $1.
Jeff Borysiewicz, an executive at the gigantic Corona Cigar Co. and executive vice president of Cigar Rights of America, said Monday night that even if the tax ends up at the lowest of those ranges, he won’t be satisfied.
“I don’t feel good about what’s happened,” he told me. The group was among those arguing for a percentage tax increase equivalent to the 156.4 percent boost for cigarettes. That would have put the cigar cap between 12 and 13 cents.
Borysiewicz said he’s convinced that a tax even in the 40-cent range will have significant negative repercussions on manufacturers, importers, retailers and customers as it ripples through the market.
As you read the figures in the new bill, bear this in mind: What you see today is almost certain to become law. SCHIP enjoys strong support from key GOP and Democratic lawmakers, and what the House approves is what the Senate will vote on. Though there has been a lot of talk about having the legislation ready for a Jan. 20 signing by President Obama on Inauguration Day, I’m told it’s highly unlikely the Senate will vote by then.
photo credit: Stogie Guys