Chicago will now be the second largest city in the U.S. where you must be 21 to use tobacco products. And, taxes on those products, including cigars, are going up.
Today, the Chicago City Council voted 35-10 in favor of raising the minimum age to purchase tobacco from 18 to 21 and increasing taxes on a variety of tobacco products, including cigars.
The move roughly a month after the same City Council moved to delay the vote on the anti-tobacco measures over a variety of concerns.
For cigar smokers, taxes on cigars will now increase by 20 cents per cigar, this is on top of a state 36 percent tax on the wholesale price and a 30 cent per cigar tax from Cook County.
This means that a cigar that has a suggested retail price of $9.50 will now likely retail for around $12.68 in Chicago. The actual cigar will only cost around $11.21 when you get to the register, but after a total of 10.25 percent in sales taxes, 30 cents to the county and 20 cents to the city, almost $1.50 in additional taxes are added.
It should be noted that the increase is less than what was originally proposed last month. The original tax increase was slated to be 90 cents per cigar.
While the tax on cigarettes is not going up, little cigars will now receive an additional 20 cents per cigar tax (up from 15 cents in the original proposal), pipe tobacco will be taxed at 60 cents per ounce, roll-your-own tobacco will be taxed at $1.80 per ounce and smokeless tobacco will be taxed at $1.80 per ounce. These taxes are in addition to any state and county taxes.
“We are grateful that the city was willing to learn about our industry, listened to our concerns and worked together in partnership to find a compromise that will keep our small neighborhood businesses viable,” said Phil Ledbetter, co-owner of Up Down Cigar and spokesperson for the Chicago Cigar and Pipe Tobacco Merchants Association, in a statement to halfwheel.
“We pride ourselves on being responsible tobacconists and support legislation to keep our premium tobacco products out of the hands of minors and welcome stiffer penalties and fines for those who don’t follow these high standards, but we are disappointed that these productive aspects were tied to new taxes and a questionable floor pricing policy.”
The increased taxes were being pushed by Mayor Rahm Emanuel to fund a summer education program for those entering high school.
It won’t be until July 1 before the new taxes go into effect. Fortunately, there will be no “floor tax,” meaning retailers will not owe added taxes on any products that they have received by July 1.
There is however minimum price “floor” for cigars. It will be illegal to sell large cigars for any less than $1.36 per cigar or small cigars at $11.50 per pack of 10.
Ledbetter’s reference to the “questionable floor pricing” is based on the fact that the floor pricing doesn’t adjust with increasing or decreasing taxes on tobacco products.
As for whether the law sticks, it remains to be seen. Threats of a lawsuit alleging that the new tax increases violate the Illinois constitution existed before today’s vote and while the reduction in new taxes is important, it doesn’t have any bearing on whether the new tax is actually illegal.
The argument is that a home rule municipality, which Chicago is, is not allowed to charge an additional excise tax on tobacco products unless the tax existed prior to July 1993.
In addition, the range for fines for selling to tobacco to those under 21 has increased over previous statues. Under the old rules, the fines ranged from $1,000-2,500 for a first offense, it’s now $1,000-5,000. Any subsequent violations now carry a fine from $2,500-10,000, up from a maximum of $5,000 previously.
Interestingly, the proposal removed fines for minors who possess tobacco.
Chicago becomes the second largest city, after New York City, where you must be 21 to purchase tobacco products. A couple weeks ago, San Francisco, the 13th largest city in the country, also moved to raise its minimum tobacco purchasing age.