The state of New Mexico has recently made a decision to remove the cigar tax cap that had been in place for over a decade. This means that cigar taxes will be going up significantly in the coming months, leading to concerns among cigar smokers and retailers alike.
The cigar tax cap in New Mexico was introduced in 2010, as part of a broader package of tax reforms. At the time, the state's tax on cigars was set at 25% of the wholesale price, which was seen as relatively high. The cap was designed to limit the tax rate to no more than 50 cents per cigar, which meant that taxes would not go up if cigar prices increased.
However, in the years since the cap was introduced, cigar prices have risen steadily as a result of various factors, including inflation, supply chain disruptions, and increased demand from consumers. As a result, the state's revenue from cigar taxes has remained relatively flat, leading some lawmakers to argue that the cap was no longer necessary.
In early 2021, a bill was introduced in the New Mexico Legislature to remove the cigar tax cap and increase the tax rate to 50% of the wholesale price. The bill was supported by the state's governor, Michelle Lujan Grisham, who argued that the increased revenue would be used to fund critical state services, including education, healthcare, and infrastructure.
The bill passed the Legislature in late March, and was signed into law by Governor Lujan Grisham in early April. The new tax rate will go into effect on July 1, 2021, and is expected to increase the price of cigars by an average of 25 cents per stick.
The decision to remove the cigar tax cap in New Mexico has been met with mixed reactions. Some cigar smokers and retailers have expressed outrage, arguing that the increased taxes will create a financial burden for consumers and harm small businesses that rely on cigar sales. Others have supported the move, arguing that cigar smokers should pay their fair share of taxes and that the increased revenue will be used for important public services.
Regardless of how one feels about the decision, it is clear that cigar taxes in New Mexico will be going up in the coming months. For cigar smokers, this means that they will need to pay more for their favorite cigars, and may need to adjust their smoking habits accordingly. For retailers, this means that they will need to find ways to adapt to the new tax environment, and may need to consider raising prices or reducing their margins in order to remain competitive.
In conclusion, the removal of the cigar tax cap in New Mexico represents a significant change in the state's tax policy, and is likely to have an impact on cigar smokers and retailers alike. While the full implications of the decision are not yet clear, it is important for all stakeholders to remain informed and engaged in the ongoing policy debate.
Written by Thomas Sigaro. The Cigar Connoisseur.