Governor Andrew Cuomo proposed a massive annual statewide $23 million tax hike on cigars as part of his proposed Executive Budget released in January. This would be accomplished by changing the way state cigar taxes are calculated, which would result in a 160 percent tax hike (raising the current tax rate of 28.5 percent to 75 percent).
One analyst recently estimated that a cigar currently on the shelf for $7.00 would increase to $9.50 due to the tax hike. And for a box of 20 of these cigars, the increased taxes would add an additional $50 to the price. For more expensive cigars, the increase would be even greater. Should the proposal become law, it would likely bring about the closure of some small businesses and lost jobs.
In an attempt to close New York State’s $4.4 billion deficit, Gov. Cuomo proposed a package of $1 billion in tax hikes. Despite Republican Senate Majority Leader John Flanagan responded to the proposed package of tax hikes with a bold “No”, Republicans have failed kill similar cigar tax hikes in the past.
Historically, when New York finds itself in financial deficits, it has turned to cigar tax hikes. In 2009, the state hiked taxes on cigars from 37 percent of the wholesale price to 46 percent. The following year, cigar taxes went up again to become the highest in the nation. In addition to the tobacco tax, cigars are subject to a 4 percent state sales tax.
Stay tuned to see how Gov. Cuomo’s proposed cigar tax hike plays out in the budget negotiations this year. Republicans hold a narrow majority in the State Senate, which the Democrats will try to take away in the November elections this year.
Gov. Cuomo is also up for re-election this year.