Now they come for the pipe smokers

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!]

SCHIP tax avoision
Children, say “thank you for smoking”


7 thoughts on “Now they come for the pipe smokers”

  1. I don’t smoke a pipe, but sometimes it seems like a plausible idea. The idea of putting a sin tax on anything seems silly. I am not a big fan of smoking, but I think that most tobacco products should be self-serve, i.e. roll-your-own. If you want to buy tobacco and put it in a pipe, fine. If you want to roll it in paper, that’s fine too. I think that it would generally lead to a decrease in excessive smoking. A vice that is too easy to partake in is always abused. The only exception to this should be the cigar, which is all-tobacco anyway.

  2. As a tobacco retailer I simply see this as another federal tax grab that deprives the states of their excise tax revenue. We used to sell a lot of imported German RYO tobacco before SCHIP. Today, we sell no RYO tobacco. The state made more on the product than we did at 65% of the wholesale cost, today we make nothing and neither does the state.

    If pipe tobacco is increased to the RYO tax rate the state will lose even more revenue they depend on to support existing programs. Our legislators should be calling our Congressional delegation and telling them to vote against this bill.

    Cascade Cigar & Tobacco

  3. The feds should take a look at how California does it. Pipe and cigar tobacco is taxed double due to an unintended consequence of various fund-raising, sin-tax laws. The first law said that any time cigarettes are taxed, loose tobacco will also be taxed. New laws taxing tobacco usually specify a tax on commercially-rolled cigarettes and a tax on loose tobacco. So you get a new law taxing loose tobacco and a prior law additionally taxing loose tobacco because of the new cigarette tax.

    And with all that, we STILL can’t balance the budget nor spend within our income.

  4. Per the Surgeon General’s Report, pipe smoking has no statistically significant health risk. (Which brings the whole second- and third-hand smoke issue into question…) And few enough people smoke pipes–with tobacco–that the State stands to gain very little in the way of revenue from this; it’s just another bid to take over our lives.

    And, living in Washington AC, I haven’t been able to smell Frog Morton for a mere $18 in years. (What’s your price, Jan?)

  5. Drang, although I would love to sell McClelland tin tobacco, I got tired of customers yelling at me about gougning. We pay 65% of the wholesale cost in tax, they see the same tobacco online for less than half the price we must ask in Oregon.

    The states shoud really start feeling the decline in tobacco excise tax revenue this quarter, retailers have lost not only the loose RYO tobacco, but the flavored cigarettes too. The state made $11.80 a carton on those. The companies now make the same flavors in small cigars, but the consumer does not like them. No sales, no taxes. I am hearing that a lot of liquor stores are getting out of selling cigarettes, the retail display allowances are all but gone and the cost of a carton of cigarettes versus what the retailer makes is not worth tying up cash flow.

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