Higher Cigar Tax Passes in House

David Savona
Posted: September 26, 2007

The U.S. House of Representatives voted yesterday to approve an additional $35 billion in funding for the State Children's Health Insurance Program (SCHIP). The funding would come from higher taxes on cigarettes and cigars.

The legislation has been vigorously fought by members of the cigar industry, including cigarmakers such as Rocky Patel and Christian Eiroa and prominent retailers such as Jeff Borysiewicz of Corona Cigar Co., as well as the Cigar Association of America and the International Premium Cigar & Pipe Retailers Association.

The original measure called for a substantial increase in the cigar tax, from 20.7 percent of the manufacturer's selling price with a five-cent cap to 53.3 percent with a $10 cap, and also called for a floor tax to be levied on companies with inventories of cigars and tobacco. A compromise was worked out earlier this week eliminating the floor tax from the legislation, but the proposed increase in the federal excise tax was kept largely intact, to 52.988 percent of the manufacturer's selling price, with a cap of $3.

The increase is considerable. A perusal of the 12 corona gordas rated in the June 2007 issue of Cigar Aficionado shows that each now carries a federal excise tax of five cents. Under the bill passed by the House, three of the cigars would fall under the $3 maximum tax, and the least expensive would have a federal excise tax of $1.19.

The Senate is expected to vote on SCHIP later this week.

President Bush has said he would veto the legislation. The House vote was 265 to 159, not large enough to overturn a presidential veto.

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