By Timothy S. Donahue
Top Takeaways:
- Across-the-board hikes: Gov. Matt Meyer’s proposed FY2027 budget would raise cigarette, cigar, vapor and moist snuff taxes statewide.
- Revenue focus: The administration estimates the tobacco tax changes would generate roughly $18–$19 million in new annual revenue.
- Mixed reaction: Public health advocates have long supported higher excise taxes, while retailers and nicotine product sellers warn of margin pressure and cross-border impacts.
Delaware Gov. Matt Meyer has proposed sweeping tax increases on tobacco and nicotine products as part of his $6.9 billion fiscal year 2027 budget, which includes roughly 5% growth in operational spending and a mix of departmental cuts and new revenue measures.
At the center of the proposal is a $1.50-per-pack increase on cigarettes, raising the state excise tax from $2.10 to $3.60 per pack. The governor’s office estimates the broader tobacco tax package would generate approximately $18 million to $18.9 million in additional annual revenue.
The plan also targets other nicotine categories:
- Cigars and other tobacco products: Increase from 30% to 40% of the wholesale price.
- Vapor products: Double from $0.05 to $0.10 per milliliter of e-liquid.
- Moist snuff: Increase from $0.92 to $1.23 per ounce.
For premium cigars, which are taxed as “other tobacco products,” the change would move Delaware toward the higher end of percentage-based excise structures. Industry observers note that percentage-of-wholesale systems scale with price, so higher-priced cigars would see larger dollar increases than value brands.
The proposal builds on prior legislative efforts. In 2025, lawmakers considered raising the OTP tax rate to 45% of wholesale, but the measure did not advance beyond committee.
Meyer’s broader revenue plan also includes increases in business formation fees and adjustments to the state’s escheat cap — the legal framework governing abandoned or unclaimed property.
Reaction to the tobacco tax component is expected to be divided. Public health groups have historically supported higher excise taxes as a deterrent to smoking and to youth access. At the same time, nicotine product retailers and distributors often argue that steep increases can squeeze small businesses, encourage cross-border purchases, and fuel illicit trade — particularly in smaller states like Delaware, which is bordered by Maryland, Pennsylvania, and New Jersey.
The proposal will now move through the state’s legislative budget process, where lawmakers could amend, scale back, or expand the tax provisions before final passage.
