And it's helping tobacco companies avoid up to $1.1 billion in taxes
A dozen tobacco companies have avoided as much as $1.1 billion in taxes by using fillers (like the clay found in cat litter) to make their cigarettes heavier, exempting them from a 2,653 percent increase in a federal excise tax on non-”large cigar” tobacco products.
As reported by Bloomberg News, current rules “require a rolled tobacco product to weigh at least 3 pounds per 1,000 to be labeled as a ‘large’ or ‘premium’ cigar, a category where taxes increased just 155 percent.”
The practice of weighting tobacco products has contributed to a 100 percent increase in sales of the filler-laced products, and a report from the Centers for Disease Control and Prevention blames the “tax disparities between product types” for increased adult consumption of pipe tobacco and cigarette-like cigars. While cigarette smoking has been on the decline for more than a decade, “large cigar” smoking, including the filler-laced cigarettes, tripled in the same time period.
Despite booming sales, the Government Accountability Office estimated in a 2012 report that “market shifts from roll-your-own to pipe tobacco and from small to large cigars reduced federal revenue” by up to $1.1 billion from April 2009 through September 2011.
And it’s completely legal. The Treasury Department said tobacco companies aren’t doing anything illegal by making their products heavier, according to Bloomberg.“If you meet the definition of a large cigar, then you’re a large cigar,” Thomas Hogue, a spokesman for the tobacco bureau, told the news outlet in a telephone interview. “There’s nothing in the Internal Revenue code that goes after the specifics on how that weight is achieved.”
Illinois Senator Dick Durbin recently introduced legislation to close the loophole, which would equalize the tax structure and eliminate the incentive to pack products with weighty fillers. The measure, if passed, could generate $3.6 billion in new tax revenue over 10 years, Christina Mulka, a spokeswoman, told Bloomberg by e-mail.
According to the CDC, tobacco use causes more than 5 million deaths, worldwide, each year. Current figures suggest that tobacco use will cause more than 8 million deaths annually by 2030.
It remains the leading preventable cause of death.
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