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Department of Health backs cigarette, cigar tax increases; retailers and wholesalers urge caution
Summary
State staff and the Department of Health described the governor's Article 5 proposal to raise the cigarette tax 75¢, eliminate the distributor stamp discount and lift the cigar cap to $2, estimating roughly $8 million in FY2027 revenue; convenience-store and cigar-industry witnesses warned the increases could drive cross-border and online sales and shrink local collections.
Sharon, a Finance Committee staff presenter, told the House Committee on Finance that the governor's Article 5 would raise the cigarette tax 75¢ per pack, taking the state tax from $4.50 to $5.25 and making the change effective Sept. 1, 2026. The proposal also would eliminate a distributor stamp discount and raise the cap on the other-tobacco-products (OTP) cigar tax from $0.50 to $2, staff said. Committee documents project roughly $6.6 million from the cigarette component and an additional $6.6 million from the OTP/cigar change in FY2027, with the packaged tobacco measures collectively contributing about $8 million to the governor's budget estimate.
Joe Cadiga, the state budget officer, reiterated staff's revenue…
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