New York State Eying Tax Hike On Cigars
New York may soon raise its tax rate on cigars and other tobacco products, even though the Empire State already boasts one of the highest rates in the nation. In matching bills introduced in both the State Senate (S01915) and Assembly (A01663), New York lawmakers proposed raising the tobacco tax from 75 percent of a cigar’s wholesale price to 95 percent. The bills currently reside in the Health Committee for both houses.
The bills were introduced earlier this month and are sponsored by Assembly Member Linda B. Rosenthal and State Senator Gustavo Rivera. Along with the proposed tax hike, the legislation also aims to change certain definitions relating to tobacco products and the minimum pack sizes for tobacco products, but neither of those measures are expected to have a direct impact on the premium, handmade cigar market.
The proposed 95 percent rate, as well as the current 75 percent rate, is a progressive model. It becomes more damning to the buyer as the price of the cigar goes up, which progressively increases the tax owed. Most premium cigars carry a retail price of twice the wholesale value. So, if we were to imagine this new proposal in action, a $12 cigar—meaning a smoke with a $6 wholesale value—would carry a New York State tobacco tax of $5.70. A $16 cigar ($8 wholesale value) would have $7.60 in tobacco taxes, and a $20 cigar ($10 wholesale value) would have $9.50 in tax.
New York tobacco taxes also have a hefty minimum, particularly for cigarettes. Under the new proposals, the minimum cigar tax would need to mirror that of the minimum tax charged for a pack of 20 cigarettes, $5.35. For example, with this proposed legislation, even if you buy a single cigar, and 95 percent of the wholesale price is less than $5.35, you would still be charged the minimum tax of $5.35. The minimum tax has been in place for years for cigarettes, now regulators want to tie it to cigars.
Taxation on tobacco products can vary significantly state-by-state. Some states lump most tobacco products together, others define them differently or tax based on price categories, and so on. Therefore, it can be difficult to objectively say who has the definitive highest, or strictest, tobacco taxation rates in the country. New York, however, is undoubtedly among the frontrunners, and has the highest minimum tobacco tax in the United States.
It’s not presently clear when the proposed bills will go up for a vote in either house. But, if fully passed, the legislation would be effective immediately.
The Premium Cigar Association has created an online petition opposing the proposals, which you can sign here.
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