Cigar taxes in New York State will soon be among the highest in the nation. Last night, New York's politicians voted to raise the tax on cigars from 46 percent of the wholesale cost to 75 percent, a 63 percent increase. The new tax goes into effect August 1.
The striking rise in taxes is the result of an emergency vote held in Albany to keep the state government operating. The big target was cigarettes, and taxes on cigarettes will go up $1.20 per pack on July 1. The state also intends to tax cigarettes sold tax-free to tourists on Native American reservations in the state.
The cigar tax soared despite heavy lobbying efforts by the New York State Tobacconist's Association, which is headed by Ron Melendi of De La Concha.
New York State politicians said the new taxes would provide more than $500 million in revenue, but New York tobacconists have argued that cigar smokers will opt to buy their cigars in cheaper, neighboring states or on the Internet, depriving the state of taxes and ruining the businesses of mom-and-pop cigar shops throughout the Empire State.
"We're already close to 50 percent, going up to 75 percent is going to make lots of people run away, either stop smoking or find alternatives. I think we are going to be in deep trouble," said Bass Fakih, who co-owns the Cigar Inn cigar shop and lounge on Second Avenue with his brothers, Billy and Bass. "I don't know if we can handle it. It looks horrible."
For cigar smokers in New York, buying premium, handmade cigars will become a far costlier affair. Cigars are typically sold for twice the wholesale price, so a cigar with a $6 suggested retail price, which is now subject to New York State taxes of $1.38, will have a state tax of $2.25 come August 1, or $56 for a box of 25 cigars. High-priced cigars that retail for $20 apiece will be taxed at $7.50, and buying a box of 25 would result in nearly $200 worth of state taxes alone.
Gov. David Paterson originally called for a 90 percent tax on cigars. The New York State Tobacconist's Association was hoping to negotiate a cap on the taxes, minimizing the damage.
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