On Wednesday a new tobacco tax went into effect, increasing federal tax on each pack of cigarettes by 62 cents to $1.01.
However, if you smoke you probably noticed prices jump already. The major cigarette makers raised prices a couple of weeks ago to offset any drop in profits.
And it's not just cigarettes. Other tobacco products, from cigars to pipes and smokeless are going up as well. For example, the tax on chewing tobacco will go up from 19.5 cents per pound to 50 cents. The total expected to be raised over the 4 1/2 year-long health insurance expansion is nearly $33 billion. The money raised by the new tax goes to healthcare.
Is there a trade here?
If you’re thinking short the cigarette makers, think again.
Fast Money trader Jeff Macke doesn’t think the new tax has much if any negative impact on companies such as Altria , the maker of Marlboro and Virginia Slims.
In fact he thinks it could benefit them because “if it leads to 10% fewer people smoking it will give them a reason to cut jobs – and by more than 10%!”
But no matter what happens with the tax, Macke remains bullish on Altria. “Either way the company should continue to outperform,” he says.
