Nothing Fair about The Tobacco Tax Equity Act
PCA | October 2, 2023
In September 2023, Congress introduced the CARE For Moms Act, a piece of legislation aimed at enhancing healthcare services for expecting and new mothers. However, it is crucial for our industry stakeholders to be aware that this act also proposes substantial tax increases on cigars and other tobacco products.
The language proposing these tax hikes closely mirrors that of the Tobacco Tax Equity Act, a bill that has been previously introduced in Congress but has not succeeded in gaining traction or passing. It is noteworthy that the Tobacco Tax Equity Act is now making a return as a standalone item, which warrants your attention and vigilance.
The Tobacco Tax Equity Act is not equitable. While proponents of the Tobacco Tax Equity Act may universally disdain tobacco, a harm reduction tax strategy relies on applying rates proportional to the products’ risks to society. For example, NIH data from the Population Assessment of Tobacco and Health (PATH) illustrates that the average consumption rates for certain tobacco products are inconsistent with consumer addiction. Different products also have unique economies, consumer demographics, and overall social and public health impacts. For this reason, they have always had distinct tax rates.
Tobacco Tax Equity Act disproportionately targets low-income people and communities of color. Civil rights activists such as Al Sharpton and the ACLU have already cautioned against tobacco policies that will spur illicit markets that disproportionately affect vulnerable communities. This bill is a massive regressive tax that predominantly falls on those least able to afford it. Worse, its largest tax increases focus on products culturally favored in black and brown communities.
The Tobacco Tax Equity will bankrupt small businesses and shift market control to large corporations. From field to consumer, the tobacco industry is composed of thousands of sole proprietors and small businesses. They are the family-owned manufacturers that blend hand-rolled cigars and pipe tobacco. They are brick-and-mortar shopkeepers on Main Street. Reminiscent of a tactic by organized crime, the Tobacco Tax Equity Act aims to extract the value of the tobacco industry as it drives bankruptcies and consolidation of market share. It’s big government, picking winners and losers.
Tobacco is highly taxed at the state level. Forty-eight states and the District of Columbia tax “large cigars,” and states tax these products as high as 95% of the wholesale price. A federal tax hike will force businesses to close and deprive these states of this revenue. The Tobacco Tax Equity Act rate isn’t a feasible policy proposal for both industry and the states.
Tobacco tax increases fail to perform. Health awareness and cultural shifts have led to a rapid and steady decline in tobacco consumption for the past 40 years. According to the Department of Agriculture, the number of tobacco farms in the United States has decreased from approximately 180,000 to only 10,000. In 2009, Congress increased tobacco excise to fund SCHIP. Today, those revenues have dropped 27.4%, according to OMB. That’s a loss of over $5 billion per year! Responsible governance requires sustainable budget practices.
21-year-old adults can make reasoned decisions about tobacco consumption. Every day, adult consumers make personal decisions about the products they choose to consume and their health. Underage tobacco consumption is against the law and should be addressed through support for law enforcement of T-21 and the many state laws aligned with this policy.
As retailers and manufacturers in the premium cigar sector, it is vital for you to stay informed about legislative developments that may affect your business. The Premium Cigar Association (PCA) will continue to monitor the progress of the CARE For Moms Act and the reintroduction of the Tobacco Tax Equity Act as a standalone bill and provide updates as needed.
The PCA, representing 3,000 small businesses retail tobacconists and 30,000 retail employees, urges Congress to oppose the Tobacco Tax Equity Act of 2023 (S. 2929 (IS)). Through CigarAction.org, you can easily and quickly send a message to your state’s Senators and Representatives expressing your opposition to these proposed bills. Click here to oppose the Tobacco Tax Equity bill and click here to oppose the CARE for Moms Act and its Tobacco Tax Equity provision.
