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    July 17, 2007

Cigarmakers in a panic - The federal tax on each cigar could rise from 5 cents to $10.
By JAMES THORNER
Published July 17, 2007



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Eric Newman punches the numbers on his calculator and gapes at the results one more time.

It's no mathematical error: The federal government has proposed raising taxes on premium cigars, the kind Newman's family has been rolling for decades in Ybor City, by as much as 20,000 percent.

As part of an increase in tobacco taxes designed to pay for children's health insurance, the nickel-per-cigar tax that has ruled the industry could rise to as much as $10 per cigar.

"I'm not sure in the history of man, since our forefathers founded the country in 1776, that there's ever been a tax increase of 20,000 percent," said Newman, who runs the Tampa business founded by grandfather Julius Caesar Newman. "They had the Boston Tea Party for less than this."

When it comes to tobacco sales, cigars are just a speck compared to cigarettes. In 2006, the nearly 400-billion cigarettes sold domestically dwarfed the 5.3-billion cigars.

But cigars are intertwined with Tampa's lineage.

Though the local industry has shriveled from foreign competition and domestic consolidation, cigarmaking still employs more than 1,000 in Tampa. About 900 work at the factory, offices and warehouse of Hav-a-Tampa, owned by foreign tobacco giant Altadis.

Newman machine-makes 35,000 cigars a day at 16th Street and Columbus Avenue and imports hand-wrapped varieties from Latin America. He estimates Florida makes or imports 80 percent of the cigars consumed in the United States and predicts devastation if the new taxes are approved this summer.

Many casual smokers are well heeled enough to plunk down $10 for a premium puff. But would they pay $15 to $20 for the same pleasure?

"Why don't we just go out of business?" Newman said. "Here, you can run our company, Mr. Government."

Here's the source of the controversy: The Democrat controlled Congress has sought an extra $35-billion to $50-billion for the state children's health insurance program. The program distributes payments to the states to help buy coverage for kids not poor enough for Medicaid.

Cigarettes, which accounted for more than 95 percent of tobacco tax collections last year, are the main focus of the bill. Federal taxes on a pack would jump from 39 cents to $1.

But the legislation has dragged cigars along for the ride. The industry operates under a 4.8 cents-per-cigar tax cap.

Under the proposed bill, taxes on "large cigars," a category that includes all but the tiny cigars sold in 20 packs like cigarettes, would rise to 53 percent.

A U.S. Senate version of the bill under consideration today in the Finance Committee sets the maximum tax per cigar at $10.

"We are a very small industry. We're the fly. The cigarette industry is the elephant as far as tax collections are concerned," Newman said. "We've been roped in with conglomerates that own cigarette companies."

Newman's eyes and ears in Washington, Norm Sharp, president of the Cigar Association of America, was dumbfounded when the legislation went public Friday.

"I thought there was a typo. I thought they meant 10 cents per cigar, not $10 per cigar. I was stunned like everyone else," Sharp said.

Sharp's organization represents 66 members, including Newman, Altadis and Jacksonville's Swisher International, the global company that makes Swisher Sweets.

The association has lobbied to exclude cigars from the bill, but bristles at the public relations challenge: How do you oppose a sin tax Congress has rigged to help sick kids? Senate staffers couldn't be reached for comment.

In Newman's view other companies declined comment and left the talking to Sharp, it's not just unfair but also immoral to overtax a product enjoyed not by addicts but by worthy pleasure seekers. The average aficionado smokes about three cigars a week at about $3 to $5 apiece, according to the cigar association.

"A good wine. A good scotch. A good bourbon. A good cigar. It all enhances the quality of life," Newman said. "We're in the relaxation business."

The Bush administration may inadvertently come to the industry's aid. The president has vowed to veto the bill, not over the cigar provision but over objections to expanding federally financed health care for the non-indigent.

Several business in and around Ybor City, usually blind to the workings of Washington, will be craning their necks toward the capital.

"Things happen strangely in Washington," Newman said.



James Thorner can be reached at (813) 226-3313 or thorner@sptimes.com.

posted by mholdri to culture at 1:17 P.M. EST     (10 Comments)


Comments ...


As someone recently said, so the best way for parents to make sure their kids are kept healthy is to start smoking?
posted by mholdri at 01:18 P.M. EST on Tue Jul 17, 2007     #



I am disqusted that smokers are the ones who get stuck footing the bill for children's health insurance programs. It seems to always be the tobacco taxes that foot the bill. Really, really unfair, unjust, undemocratic & just wrong. Especially for smokers who have no kids, and don't even use children's health services.
posted by starling02 at 01:42 P.M. EST on Tue Jul 17, 2007     #



This isn't really about smokers, it's about how the government and the people running it feel they have a right to your earnings, to your property and to your industry for their political benefit.

This is what is called "legal plunder" and it's also called socialism; it should be opposed on principle, on American pricipals not just because you smoke cigars or don't!

posted by mholdri at 02:00 P.M. EST on Tue Jul 17, 2007     #



But why does it seem that it is mainly tobacco (cigars or cigs) that gets hit with these heavy taxes more than anything else? If they taxed gasoline $10. per gallon, all hell'd break loose by the masses. But they accept it as 'for the good' if it's tobacco.
posted by starling02 at 06:53 P.M. EST on Tue Jul 17, 2007     #



Well, that would certainly kill off one of my pastimes. Not to mention, a number of Toledo businesses. When my $3.50 stogie suddenly turns into $5, and some of the premium $10 ones go even higher, then you can forget it.

I swear, this can't go on forever. There has got to be a point where the whole system collapses on itself.

posted by TheTalentedMrC at 07:29 P.M. EST on Tue Jul 17, 2007     #



Update: from what I can see, the tax was stripped out of the House bill, and even if it comes back in committee, Bush apparently is going to veto the whole thing.
posted by TheTalentedMrC at 07:40 P.M. EST on Tue Jul 17, 2007     #



But, like Freddy Krueger, Pinhead, Michael Myers,. or Jason Voorhees-it'll be back. With the Klintoons return and a dem congress, more than likely, this will be the 'most important legislation we have at hand.' I can hear it now. Funny how with politicians, it's always FOR THE CHILLLLLDRUN-well, unless, of course, you're one who has the misfortune to be one that's still in the womb. Then, you're expendable .
posted by Darkseid at 08:32 P.M. EST on Tue Jul 17, 2007     #






A dutiful taxpayer with an extreme love for children...if you love children you'll do the same!

posted by mholdri at 09:43 A.M. EST on Wed Jul 18, 2007     #



Well, that would certainly kill off one of my pastimes. Not to mention, a number of Toledo businesses. When my $3.50 stogie suddenly turns into $5, and some of the premium $10 ones go even higher, then you can forget it.

I swear, this can't go on forever. There has got to be a point where the whole system collapses on itself.

That has already happened. notice the collapse of the Soviet Union.

posted by mike2004 at 02:13 A.M. EST on Thu Jul 19, 2007     #



I saw this article yesterday on Drudge...

"Norwegians are among the most heavily taxed people in the world, and that in turn has made Norway one of the most expensive countries in which to live. Most accept the taxes they're ordered to pay on income and even net worth and property, but growing numbers are publicly complaining about sky-high taxes on everything from cars to fuel to consumer goods.

Norwegians differentiate between skatter (taxes) and avgifter (duties, fees or user taxes) and the latter is the most hated. They're what causes a glass of house wine at an Oslo restaurant to cost the equivalent of nearly USD 16, or a gallon of gas to cost nearly USD 9 at current exchange rates.

...

The head of the tax payers' association, Jon Stordrange, said he thinks user taxes should be adjusted to reflect actual costs inflicted on society. "Then I think people would have more respect for the system," he said."

posted by MaggieThurber at 07:54 A.M. EST on Thu Jul 19, 2007     #



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