The Futility of Tobacco Taxes: Why They Fail to Curb Smoking

For the better part of the last two decades, anti-tobacco advocates have turned their attention towards pursuing legislative endeavors that seek to implement massive tax increases on tobacco products with the goal of curbing usage while increasing revenue into government coffers. The logic seems straightforward: hike taxes and consumption will drop.  While harm reduction efforts geared towards other categories of tobacco are justified by mortality, morbidity, and youth usage impact data, targeting premium cigars is not. Hand-rolled cigars continue to be a target of legislators and anti-smoking groups and Cigar Rights of America is fighting these proposals across the nation. 

For example, New York has proposed legislation that would increase the tax on premium cigars to 129% of the wholesale cost. In Massachusetts, the tax would go from 40% to 80% of the wholesale price. While neither proposal has gained traction, this approach is deeply flawed, and here’s why increased taxes on premium cigars never work.

First and foremost, from a public health perspective, the impact of increased taxes on premium cigars is negligible. Premium cigars are typically consumed in moderation, and their health risks are not as pronounced as those associated with heavy cigarette smoking. The occasional and moderate use of premium cigars means that the potential health benefits of reducing their consumption through taxation are minimal. Public health efforts would be better directed toward reducing cigarette and other high-risk tobacco product use we must recognize the unique consumer base of premium cigars. 

Secondly, unlike regular cigarette smokers, who often smoke out of habit and addiction, premium cigar enthusiasts treat their hobby as a luxurious and occasional indulgence. This demographic is distinct, typically consisting of individuals who view cigar smoking as an art form and a ritual rather than a daily necessity. This type of consumption pattern was confirmed in the 2013-2014 Population Assessment of Tobacco and Health data that found that the average cigar consumer enjoyed a premium cigar 1.7 days per month.

When it comes to purchasing habits of premium cigars at the individual state level, massive tax increases do the opposite of their intent as consumers have the ability to purchase premium cigars from online cigar shops or other out-of-state venues. While premium cigars make up a de minimis percentage of state’s tobacco tax-base, the shift to online sales or out-of-state purchases ultimately undermine the tax policy goals by reducing legitimate in-state and in-store sales and leading to significant revenue losses for the state. Instead of curbing consumption, these taxes merely push purchases to out-of-state retail outlets and hurt local tobacconists and specialty shops that bear the brunt of these tax hikes. These establishments, already operating on thin margins, rely heavily on selling premium cigars. Increased taxes can lead to reduced sales, threatening the livelihood of these small businesses and harming local economies. Ultimately, the economic burden falls disproportionately on these small retailers, many struggling to survive in an increasingly competitive market.

Additionally, an often overlooked component of premium cigar enjoyment is the cultural and social factors that play a significant role in the enjoyment of premium cigars. Enjoying a premium cigar is often part of a social ritual, such as celebrations, gatherings, or personal milestones. These profoundly ingrained practices are resilient to price changes, meaning taxes are less likely to disrupt these behaviors.

The strategy of applying tax increases on premium cigars does not deliver on its intended goals. The distinct characteristics of the premium cigar market, including its unique consumer base, inelastic demand, occasional consumption patterns, and cultural significance, render tax hikes largely ineffective. To achieve meaningful public health outcomes and support local businesses, policymakers should consider alternative strategies that recognize the nuanced differences within the tobacco market. Policymakers must rethink their reliance on taxation and embrace a more comprehensive approach to tobacco control that recognizes the differences in tobacco products.