US: Chicago Increases Tobacco Tax, Raises Purchase Age To 21

Source from:  Cigar Aficinado 03/18/2016

Cigar taxes are going up in Chicago, but not as high as once feared. The Chicago City Council voted in favor of Mayor Rahm Emmanuel's ordinance yesterday, increasing taxes by 20 cents on cigars and other tobacco products as well as raising the tobacco purchase age from 18 to 21 years old. The changes are scheduled to go into effect on July 1.

The ordinance will bring a 20 cent-tax hike on all cigars sold in the Windy City, far lower than the 90-cent increase the Mayor originally sought for large cigars.

Premium cigars already carry heavy taxes in Chicago. There is a 36 percent tax on the wholesale price of the cigar, plus a 10.25 percent city sales tax. Cook County, where Chicago is located, adds an additional 30-cent tax on each cigar sold. It is still unclear as to whether or not the additional 20-cent city tax will be added before or after state and city taxes rates are applied, but according to one Chicago retailer, a cigar that carries a suggested retail price of $10 will cost more than $13 after the new tax is implemented.

Taxes on pipe and roll-your-own tobacco will rise to 60 cents per ounce and $1.80 per ounce, respectively, down from the initial proposal of $6.60 per ounce on both products. Consumers of smokeless tobacco will see a $1.80 per ounce hike, the same as originally proposed.

Mayor Emmanuel's ordinance, dubbed the "Chicago Other Tobacco Products Tax Ordinance," took aim at tobacco products other than cigarettes. The OTP ordinance was first proposed by the Mayor in January but it stalled after the Chicago City Council's Finance Committee voted against his plan in early February. Mayor Emmanuel, who views yesterday's 35-10 City Council vote as a victory in the fight against youth smoking, claims the hike will raise about $6 million in tax revenue annually.

However, there were several amendments to Mayor Emmanuel's initial proposal, including the removal of a section that criminalizes the possession of tobacco products by those under the age of 21.

Aldermen opposed to the ordinance argue the increase will hurt the business of convenience stores and gas stations on the outskirts of the city, claiming consumers will likely opt to purchase their tobacco products in the surrounding suburbs or in nearby Indiana.

There is speculation that the ordinance will face resistance on the state level, as the Illinois Retail Merchants Association is claiming that some of the proposals within the ordinance violate state law, one of which prevents municipalities from enacting their own taxes on chewing tobacco. Enditem