Tobacco Companies Avoid $1 Billion in Taxes by Putting Cat Litter in Cigars

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Tobacco companies have managed to avoid as much as $1.1 billion in U.S. taxes after they discovered the use of fillers, like the clay found in cat litter, could tip the scales in their favor.

By having cigars and cigarettes weigh more, companies are able to get out of paying a 2,653 percent increase in federal excise tax, meaning they’re taking advantage of a 2009 law sparing “big cigars.”

Before the law was created, 22 companies produced small cigars. But according to the Treasury Department’s Alcohol and Tobacco Tax Trade Bureau, twelve of those companies either switched to or increased the production of bigger cigars.

“It shows what length the tobacco companies will go to avoid taxes and regulation that were designed to improve public health without regard to their customers,” Danny McGoldrick, vice president of research at the Campaign for Tobacco Free Kids, said. “They should equalize the tax to stop the shenanigans.”

By increasing the size of cigars, they have doubled the sales of weightier tobacco products and created a slower decline in tobacco use.

Adults are now smoking pipe tobacco and cigarette-like cigars in increasing numbers.

And, according to the Treasury Department, they aren’t doing anything illegal.

“If you meet the definition of a large cigar, then you’re a large cigar,” Thomas Hogue, spokesman for the tobacco bureau said. “There’s nothing in the Internal Revenue code that goes after the specifics on how that weight is achieved.”

According to Bloomberg, sales of large cigars more than doubled to 1 billion units a month in September 2011, from 411 million when the law took effect in January 2009. During that time, small cigar sales dropped to 60 million from 430 million.