Cigarette taxes push smokers to roll their own

Americans’ smoking habits experienced “sizable market shifts” since federal tobacco taxes were increased in 2009, a new government report concludes. Sales of pipe tobacco and large cigars, which are taxed at a lower rate, have skyrocketed as smokers have adjusted their buying habits to the new price structure. Pipe tobacco is increasingly used to make relatively inexpensive cartons of roll-your-own cigarettes. The Fox Valley has several shops with roll-your-own machines available for customers.

Kim Schafer of Appleton Souvenir and Cigar Co. said she’s noticed changing trends in tobacco use. “Actually, a few more people are picking up pipe smoking,” Schafer said. Monthly sales of pipe tobacco increased twelve-fold, from about 240,000 pounds in January 2009 to more than 3 million pounds in September 2011, the General Accounting Office found. Monthly sales of large cigars more than doubled, from 411 million pounds to more than 1 billion pounds over the same period. Congress increased taxes on both roll-your-own tobacco and packs of cigarettes in April 2009, making them equal. Lawmakers enacted a smaller tax increase for pipe tobacco, which has become a substitute for roll-your-own tobacco.

In Wisconsin, state cigarette taxes have increased by a $1.75 per pack since the end of 2007 to the current $2.52, making roll-your-own tobacco a cheaper alternative to manufactured cigarettes. Likewise, Congress began taxing small cigars at the same rate as cigarettes. In response, manufacturers of small cigars fractionally increased the weight of many of their products so they would qualify as lower-taxed large cigars, even though they often are just slightly larger than cigarettes and often have filters.

Premium handmade large cigars retail for $3 to $20 and more each, but “smaller factory-made cigars that meet the legal definition of a large cigar can cost as little as 7 cents per cigar,” the GAO reported. The market shift has cost the federal government an estimated $615 million to $1.1 billion in uncollected tax revenue between April 2009 and September 2011, the report said. It did not estimate how much individual states may have lost in uncollected taxes.