I’m not sure why we’re even talking about this since the Republicans aren’t interested in anything other than slashing and burning, but for the record:
Texas is only one of two states that do not impose a fee on off-brand cigarettes sold by companies that didn’t participate in the historic tobacco settlement a decade ago.
Also, Texas levies only a 2-cent tax on a pack of “little cigars” that look like cigarettes. The state tax on cigarettes is $1.41 a pack. Both carry 20 units.
“It’s a pretty big difference and there’s really no public policy benefit in providing little cigars with a tax advantage like that given the similarities between the products,” said Bill Phelps, spokesman for Altria, whose companies include Philip Morris, the country’s largest cigarette manufacturer. “By equalizing the taxes on those products, the state can realize more revenue, and we think that’s important, especially given the budget challenges.”
Texas faces a budget shortfall exceeding $20 billion, according to recent estimates.
The federal government last year raised the federal excise tax on little cigars to $1.01 — the same rate applied to cigarettes. The federal excise tax on little cigars had been 3.7 cents per pack.
But small tobacco company officials react strongly to suggestions they should be paying more, and they question big tobacco’s interest in solving the state’s budget problems.
“The big tobacco companies are trying to shift the market share to their favor by placing a tax on smaller companies that were not involved in the (late 1990s) settlement,” said Justin Phillips, a spokesman for Global Trading, a small tobacco wholesaler based in Enid, Okla.
[…]
Texas could gain an extra $38 million per year by applying the same excise tax on filtered or little cigars as it does on cigarettes, Phelps said.
Big tobacco companies have “no interest in solving budget shortfall problems. They have an interest in gaining market share,” said Bob Rowland, a spokesman for Tantus Tobacco, a small company based in Russell Springs, Ky.
Cigars historically have not been taxed at the same rate as cigarettes because they are not inhaled and are considered a “reduced harm product,” Rowland said.
On the one hand, I agree that Big Tobacco isn’t doing this out of any sense of civic responsibility, but instead is pushing the idea as a way to remove a competitive advantage that the little guys currently enjoy. On the other hand, I don’t have any problems with increasing the excise tax on the “little cigars” as suggested – just because it’s in Big Tobacco’s interests doesn’t mean it’s a bad idea. On the third hand…why are we talking about this? I just don’t see the Republicans being flexible about anything. Knock yourselves out lobbying them, but my advice would be to keep your expectations very low.
The products are similar only because small tobacco uses the same machines to manufacturer and package their small cigars as they do cigarettes. That is where the similarities end. All of these cigar product targeted by tobacco giant Philip Morris use cigar tobcco, and meet all of the long standing federal definitions for cigars including sugar content, weight and natural leaf content wrappers. These products are labeled as cigars, they are marketed in the cigar section of retail establishments and they smoke like cigars. Maybe this is why no one is talking about it. Subjecting these cigars to the cigarette tax would only shift market share to Big Tobacco’s slightly larger cigar products which are taxed at – guess what – the lower cigar tax rate. The end result of Philip Morris’ proposals – more market share for Philip Morris and no more revenue for Texas – maybe that’s why Philip Morris is talking about this.