Effort to cap cigar tax snuffed in committee

BOISE – Don’t expect to see the price on premium cigars drop anytime soon.

Legislation from Rep. Jim Clark, R-Hayden Lake, to cap the tax on premium cigars at 50 cents a stogie was rejected in the Senate Local Government and Taxation Committee on a 5-4 vote Tuesday.

Supporters of House Bill 693 said the 40 percent tax now charged on premium cigars in Idaho puts cigar store owners at a significant disadvantage because of better deals in other states and over the Internet.

But opponents argued that the bill wouldn’t stop Internet sales because some states have taxes lower than the 50-cent cap and thrifty shoppers will still look to them when purchasing premium cigars.

“I just don’t see this cap as a good tax policy,” said Sen. Curt McKenzie, R-Nampa. “I think we need to address the root of the policy, which is we don’t tax Internet sales and we tax all of these products at such a high rate.”

Oregon and Washington each has a 50-cent cigar tax. While it may seem the cap would reduce tax revenue in Idaho, that hasn’t been the case with the cap in neighboring states, supporters of Clark’s bill said. Oregon and Washington have seen a large increase in cigar sales since the caps went into effect, in turn raising even more tax revenue for those states, they claim.

Idaho’s 40 percent tax on tobacco products pushes the price of premium cigars to levels much higher than lower quality cigars because of the price difference between the products.

Sen. David Langhorst, D-Boise, said that’s unfair.

“We’re talking about a sin tax. Is it a greater sin to smoke a good quality cigar compared to a low quality cigar?” Langhorst said before voting in favor of the bill.

But Brad Hoaglun, lobbyist for the American Cancer Society, called the bill “the very first tax break for the rich.”

He said what Sen. Brent Hill, R-Rexburg, later echoed: Decreasing the tax isn’t going to stop the problem of Internet sales hurting small retailers.

Hoaglun said the proposed cap would be like taxing all cars the same, regardless of quality and amenities.

“That’s an unusual tax policy,” Hoaglun said.

Russell Westerberg, lobbyist for the Cigar Association of America, said committee members seemed to pay more attention to the health aspects of cigars rather than to the equity of the tax.

Westerberg said afterward that he wasn’t surprised by the vote. “Any time you talk about tobacco you know it’s going to be controversial and close,” he said.

Mike Sturman, owner of Sturman’s Smoke Shop in Boise, spoke in favor of the bill. He said his store loses more than 10 percent of its business each year because of out-of-state cigar sales.

“Who’s going to pay an extra $90 in the state of Idaho for a box of cigars? Nobody. It’s just not going to happen,” Sturman said.

Clark, the bill’s sponsor, said he’ll present a similar bill next year if he’s re-elected.