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Legislation

Michigan Tobacco Tax Cap Approved by Governor

Nov 5, 2021 | By Thomas Pappalardo
Michigan Tobacco Tax Cap Approved by Governor
Photo/Rey Del Rio via Getty Images

A major victory took place yesterday morning just before 10 am in the Great Lake state when governor Gretchen Whitmer signed House Bill 4485, which preserves Michigan’s 50-cent state tobacco tax cap into permanence. The cap will help keep cigar prices low in Michigan, and can save them a few dollars on each cigar they buy.

The vote to preserve the tax cap has been making its way through various committee hearings and legislative votes since March of this year, culminating in the tax cap having a landslide bipartisan victory last week with Michigan’s state senate.

Dave Jessup, executive director for the Michigan Premium Cigar & Pipe Retailers Association told Cigar Aficionado, “It’s a success for retailers and consumers. Michigan will be taking advantage of its tax status relative to other states that have higher tax rates. We hope consumers will come to Michigan and patronize our brick-and-mortar retail outlets.”

Jessup also felt the passing was a means by legislators to assist retailers who have struggled in the midst of the pandemic and is a pro-small business measure.

Usually divided by party lines, the measure has been a largely unifying measure with the majority of Michigan Democrats and Republicans both voting to pass the bill. In Michigan, the legislature is controlled by a Republican majority, while Governor Whitmer is a Democrat.

“I’m pleased to see the bipartisan approach to politics in Michigan has been successful,” Andy Hyde, president of the Michigan Premium Cigar and Pipe Retailers Association and owner of Nolan’s Cigar Bar in Traverse City, Michigan told Cigar Aficionado. “It’s great to see a consistent tax platform for retailers to continue to sell cigars in Michigan at the same tax rate we have been for the last decade.” 

The tax cap was originally passed in 2012 as an experimental means to aid brick and mortar stores in competing with online retailers, reducing a 32.4 percent tax on the wholesale price of a cigar to a 50-cent tax. 

Most cigars sell for twice the wholesale price, so a $10 cigar would have a $1.62 tax under the old levels, and a $20 cigar would have a $3.24 tax; the cap provides savings of $1.12 and $2.74, respectively, in those examples. The tax cap was set to expire this October. 

Hyde also said he hopes that this measure will inspire other states to preserve their tax caps or inspire other states who have higher tobacco taxes to put in place tax caps of their own.

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