Some Tobacco Companies Put Clay Used in Cat Litter into Cigars to Pay Less Taxes
Some tobacco companies are putting the type of clay used in cat litter into cigars to increase their weight, thereby allowing them to pay less tax, Bloomberg reports.
The tobacco firms are benefitting from a legal loophole that allows them to avoid paying as much as $1.1 billion in U.S. taxes, the article notes. In addition to the clay, they are stuffing cigars with more tobacco. Heavier cigars are spared the 2,653 percent increase in federal excise tax that affects small cigars.
According to the Treasury Department’s Alcohol and Tobacco Tax and Trade Bureau, 12 of the 22 companies that produced small cigars in the year before the new tax structure was created switched to or increased production of large cigars in the year following the law.
Last August, the Centers for Disease Control and Prevention reported a growing number of smokers are switching from cigarettes to small cigars, which are less expensive, but just as dangerous. Tax loopholes that allow little cigars to be taxed at much lower rates than cigarettes are contributing to the trend. These cigars look almost identical to cigarettes, except for their brown coloring. Packs of little cigars sell for about $1.40. In most states, cigarettes sell for $4 to $5 per pack.
In January, U.S. Senators Dick Durbin of Illinois, Frank Lautenberg of New Jersey and Richard Blumenthal of Connecticut introduced the Tobacco Tax Equity Act, which would equalize the tobacco tax structure, so companies would not have an incentive to manipulate products.
A spokesman for the Treasury Department, Thomas Hogue, told Bloomberg tobacco companies are not breaking the law by making their products heavier. “If you meet the definition of a large cigar, then you’re a large cigar,” he said. “There’s nothing in the Internal Revenue code that goes after the specifics on how that weight is achieved.”
According to the article, some small cigars use clay filters made of sepiolite, a heavy mineral used for absorption in waste treatment, industrial cleaners and pet litters.