How the Big Beautiful Bill Is Driving New State Tobacco Tax Increases

Earlier this year, President Trump signed the Big Beautiful Bill (BBB) into law. Among other provisions, the bill cut significant funding for federal social programs, shifting substantial financial obligations onto state budgets. The resulting budget pressure will inevitably push states to close their deficits by other means, and, as is so often the case, lawmakers are turning to the easiest targets. Tobacco excise taxes are once again at the top of the list, and it is critical that we fight to protect premium cigars from these increases.

​Thanks to the hard work of CRA and other industry partners, premium cigar tax caps exist in 18 states. But there are far more states that still haven’t protected premium cigars. While we expect this issue to spread to many more states, two real-world examples are below.

Indiana’s Budget Crisis: A Cautionary Signal for 2026

Indiana offered one of the clearest examples of how BBB-driven fiscal pressure translates into tobacco tax hikes. Facing a multibillion-dollar deficit and mounting urgency to finalize a budget, Republican Governor Mike Braun and the Republican leadership in the Indiana General Assembly negotiated a last-minute budget agreement behind closed doors that included an increase in the tax on all tobacco products in the state. This increase was designed to raise revenue for Medicaid and other state obligations going into 2026. For premium cigars, the tax rose from 24 percent to 30 percent. The speed and opacity of the deal underscored how easily premium cigars can be swept into broad revenue measures.

New Hampshire Introduces the First OTP Increase for 2026

​New Hampshire became the first state legislature to prefile a bill for the 2026 session that includes a tobacco tax increase directly tied to revenue to subsidize health-insurance premiums. While premium cigars are not included in this proposal, House Bill 1596 is exactly the type of revenue-driven tax proposal states are turning to as BBB-driven fiscal pressures mount. Its early introduction signals what we expect to be a growing wave of similar measures in the opening weeks of 2026, and even without premium cigars included, the possibility always remains of an amendment to include them.

Where This Will Lead in 2026​

Taken together, these early moves from Indiana and New Hampshire offer a warning for the premium cigar industry. The fiscal pressure from the BBB is pushing states to examine tobacco excise taxes ahead of 2026. Even when premium cigars are not the direct target, broad-based tax hikes raise prices across the marketplace, strain retailer margins, and diminish consumer access and affordability. As states confront widening budget gaps in 2026, the risk that premium cigars will be swept into catch-all revenue generation packages grows. CRA is actively preparing to defend premium cigars and ensure the industry is not subjected to substantial tax increases in the new year.