All tobacco will soon be more expensive in the United States

I recently wrote about the impending 62 cent increase in federal tax due on a pack of cigarettes (effective from April first, 2009). I thought it was worth mentioning that there will also be similar sized or larger increases in the federal tax being charged on other tobacco products. These federal tobacco tax increases are summarized below:


--Cigarettes: 39 cents per pack currently, increasing to $1.0066 per pack
-- Large Cigars: 20.719 percent of manufacturer's price, cap of 4.875 cents per cigar; increasing to 52.75 percent of manufacturer's price, cap of 40.26 cents per cigar
-- Little Cigars: 4 cents per pack; increasing to $1.0066 per pack
-- Pipe Tobacco: $1.0969 per pound; increasing to $2.8311 per pound
-- Chewing Tobacco: 19.5 cents per pound; increasing to 50.33 cents per pound
-- Snuff: 58.5 cents per pound; increasing to $1.51 per pound
-- RYO and Cigar Wrappers: $1.0969 per pound; increasing to $24.78 per pound
-- Cigarette Paper: 1.22 cents per 50 papers; increasing to 3.15 cents per 50 papers
-- Cigarette Tubes: 2.44 cents per 50 tubes; increasing to 6.30 cents per 50 tubes

Some of these changes help close some of the existing loopholes that have enabled certain tobacco products to enjoy tax advantages as compared with cigarettes. The most obvious example here is little cigars (e.g. Winchester). These are often the same size, shape etc as cigarettes and have a filter like a cigarette, but are able to call themselves cigars by virtue of the “paper” being impregnated with tobacco leaf (the legal definition of a cigar requires that it be tobacco wrapped in tobacco leaf, intended for smoking). So the increase from 4 cents to $1.01 federal tax per pack of little cigars will result in a substantial percent change in the price paid by consumers, but will bring it more in line with the tax on cigarettes.

Roll-your-own tobacco is very popular in many parts of the world (e.g. in Holland it’s the predominant smoked tobacco product) but is less commonly used in this country. I recently spoke to someone who as a cigarette smoker smoked a pack a day (costing around $6) but was able to purchase a pouch of RYO tobacco for $2.56 that would last for 3-4 days. The substantial increase in RYO tax will close that loophole also.

Whichever way you look at it, its going to become much more expensive to be a tobacco user. Think it can’t possibly become more expensive? Spare a thought for smokers in Ireland, where a pack of cigarettes costs the equivalent of $10. We’ve clearly got some catching up to do here in the United States.

Labels: cigarette tax, cigarettes, cigars, jonathan foulds, RYO, tobacco

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