This week the Iowa House may debate a bill that’d raise the state cigarette tax by a dollar per pack. But the cigarette tax bill that cleared the Iowa Senate last week may actually lower the state tax on some of the most expensive smokes available — the priciest cigars.
The current state tax on cigars is 22 percent — 22 cents for every dollar — so the more expensive the brand, the higher the tax the cigar smoker pays. Senator Matt McCoy, a Democrat from Des Moines, says the bill would change that.
"It goes to a weight-based system, capping the sticks — or the cigars — at 50 cents (each)," McCoy says. McCoy says to be "consistent," it’s only fair to tax each cigar at the same rate, as each cigarette sold in Iowa is taxed at the same rate. The state tax would go up to about 14 cents per cigarette under the bill that cleared the senate.
"It’s my understanding that a cigar can cost — if you can believe this — up to $15, so if you didn’t cap it, you could conceivably have several dollars worth of tax on one cigar," McCoy says. But that is what’s happening today when a cigar shop — like the ones in McCoy’s district — sells a top-of-the-line cigar.
Senator Nancy Boettger, a Republican from Harlan, isn’t wild about lowering the cigar tax. "I believe that anybody that pays $15 for one cigar, can easily pay $25 for it," Boettger says. Senator McCoy suggests many Iowa cigar smokers are going on-line to buy their stogies because the state tax is so high.
"And it has essentially put local retail cigar shops out of business," McCoy says. If the proposal becomes law, the state tax will more than double on a cigar that costs a dollar. But for expensive cigars, like a cigar that costs 15 dollars, the state tax today is over three dollars. It would go down to just 50 cents under the proposal that cleared the senate last week.