Tobacco

Congressional Attempt to Raise Tobacco Taxes: ‘It Could Happen Again’

While tobacco, vapor tax increases were cut from current legislation, here’s why retailers should remain vigilant
Congress
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CHICAGO — Proposed federal tobacco tax rate increases that would have doubled the tax rate for cigarettes and small cigars, among other raises, have been cut. But Thomas Briant, executive director of the National Association of Tobacco Outlets (NATO), Minneapolis, made a case at a virtual Tobacco Plus Expo (TPE) presentation for why convenience-store retailers should still care.

During the 2021 Congressional session, Congress considered a budget reconciliation bill that included significant increases in the federal cigarette and tobacco tax rates, Briant said. But those increases—which also included tax rate increase for other tobacco products (OTP) like moist snuff, large cigars, modern oral nicotine and electronic cigarettes—were removed from the bill, and the bill has yet to be considered by the full U.S. Senate.

That doesn't mean the fight is over, however. 

“The need to remain vigilant for any future federal tax increases can be seen by the potential impact of such tax rates,” Briant said.

As part of NATO’s efforts to oppose the proposed increase, the group commissioned an economic study to assess the effect on the taxes. Retailers would have taken a huge hit to sales if the tax rates had been enacted.

The economic effects of the originally proposed tax rate increases would have resulted in $801 million in lost cigarette and tobacco product sales at the retail level, Briant said. It also would have resulted in nearly $1.3 billion in lost state tax revenue and more than 14,000 jobs cut, the study found.   

“The takeaway from this Congressional attempt to raise tobacco taxes is that it could happen again,” Briant said. “Federal tax rates were last raised in 2009. … So it is important to remain watchful for future congressional moves to raise tobacco tax rates, even though the legislation has not passed Congress as of yet.”

TPE is held by Tobacco Media Group, which is owned by Kretek International, Moorpark, Calif. This year’s event will take place Jan. 26 through 28 in Las Vegas and will be supplemented by virtual sessions.

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