New SCHIP Bill—Federal Cigar Tax to Be Capped at 40 Cents

David Savona
Posted: January 13, 2009

The House Ways and Means Committee introduced the newest incarnation of the State Children's Health Insurance Program (SCHIP) today. The International Premium Cigar & Pipe Retailers Association (IPCPR) reported in an email that the legislation would impose a revised federal excise tax on large cigars—52.4 percent, with a maximum tax cap of 40 cents per cigar.

It was feared throughout the cigar industry that the cap would be much higher. The original version called for a $10 cap, and earlier versions had a cap of $3 per cigar. The tax is currently capped at five cents.

The bill, which seeks to fund an expansion of SCHIP with higher tobacco taxes, is expected to pass given the new Democratic leadership in Washington. Last year, Congress attempted to pass the expansion, but President Bush vetoed the legislation two times, most recently in December.

"Our industry came together to aggressively challenge the disastrous, proposed $3 tax cap," wrote Chris McCalla, legislative director of the IPCPR, in the email.

The new legislation also does not have a floor tax on cigars, although certain other tobacco products would be subject to the floor tax.