This was only a matter of time:
On January 13, 2010, Rep. Steve Cohen (D-TN) and co-sponsor Rep. Lloyd Doggett (D-TX) introduced bill H.R. 4439 to congress to raise the federal pipe tobacco tax from $2.8311US per pound to $24.78US per pound and “To amend the Internal Revenue Code of 1986 to impose the same rate of tax on pipe tobacco as is imposed on roll-your-own tobacco.”[...]
If this bill passes, the average increase to your favorite blends will be about:
$2.43US per 50gr
$2.74US per 2oz
$4.86US per 100gr
$10.98US per 8oz
$21.95US per 16oz
$24.15US per 500gr
These prices would be added onto the price you are currently paying for those amounts of pipe tobacco. So with the average price of 100gr tin McClelland Frog Morton being about $13.20US, the new price would be $18.06US! That is outrageous!
The motivation for the tax increase is to stop producers of roll-your-own tobacco (RYO) from repackaging their product as pipe tobacco, which is taxed at a lower rate. The two products are very similar and in the past were taxed at the same rate of $1.10 per pound. SCHIP created a huge disparity by raising the tax on pipe tobacco to $2.81 and the tax on RYO to an astronomical $24.62. RYO producers predictably reclassified their products just to keep their companies alive.
The congressmen introducing this bill are correct that the two types of tobacco should be taxed equally, but the solution is to lower the tax on RYO, not to tax both products at the insane new rate.
[Hat tip to the ever-alert Jan!]