On July 19, 2007, the U.S. Senate Finance Committee passed legislation on a 17-4 vote to reauthorize and expand the State Children's Health Insurance Program (SCHIP) which includes significant increases in the federal tobacco tax rates. Here is a summary of the proposed tax rates (which include a floor tax for the difference between what has already been paid and what will be due for items that retailers have already purchased):
- Large cigars are taxed at the rate equal to 53.13 percent of the manufacturer’s or importer’s sales price but not more than $10.00 per cigar.
- Small cigars are taxed at the rate of $50.00 per thousand (the same rate applied to cigarettes).Pipe tobacco is taxed at the rate of $2.8126 per pound, and proportionately at that rate on all fractional parts of a pound.
- Snuff is taxed at the rate of $1.50 per pound, and proportionately at that rate on all fractional parts of a pound.
- Chewing tobacco is taxed at the rate of $0.50 per pound, and proportionately at that rate on all fractional parts of a pound.
- Roll-your-own tobacco is taxed at the rate of $8.9286 per pound, and proportionately at that rate on all fractional parts of a pound. The rate for roll-your-own tobacco is intended to approximate the rate for small cigarettes.
- Cigarette papers are taxed at the rate of $0.0313 for each 50 papers or fractional part.
- Cigarette tubes are taxed at the rate of $0.0626 for each 50 tubes or fractional part.
- Small cigarettes are taxed at the rate of $50.00 per thousand ($1.00 per pack).
- Large cigarettes are taxed at the rate of $104.9999 per thousand.
So, let's say the wholesale price on a cigar is $2, the tax on that cigar would be $1.06. For a $5 cigar, you are looking $2.66 in taxes. For a super premium cigar that has a wholesale cost of $20, the tax alone would be capped at $10. So now, a cigar that would have cost the consumer about $40 now will run $60! (assuming keystone pricing by the retailer)
This has GOT to stop!