Proposed SCHIP Program Includes 20,000% Tax Hike on Cigars
At 7pm Eastern tonight, the Senate Finance Committee is considering the reauthorization of the State Children’s Health Insurance Program for 2007. As part of financing the program, the Senate is considering large increases in tobacco taxes. The hardest hit tobacco product? Cigars.
Currently, federal law caps cigar taxation at 4.8 cents per cigar. Under the proposed legislation, that tax would be raised to 53.13%, with a maximum of $10 per cigar, a raise of up to 20,000% for the most expensive cigars.
For example, under current law, the price of a $5 cigar, after taxes, is $0.048. Under the new law, that tax would be $2.50–a roughly 5200% increase. Not to mention the fact that as prices go higher, the taxes get steadily worse, running the risk of putting some cigar manufacturers and importers out of business.
Naturally, the cigar industry is dumbfounded by this proposal.
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?
Speaking as a casual cigar smoker–I have five or six a month–this strikes me as being pretty outrageous. Regardless of the merits of the SCHIP program, it seems pretty stupid to earmark it to one particular kind of tax, especially a tax so onerous that the economic viability of the product itself is put into jeopardy. Given that cigars are a product enjoyed by most people on occasion, rather than frequently, the price increase will probably simply just incline people to do without.
(link via Cigar Jack)
Although I somewhat disagree with this tax, I don’t see what the difference would be to the occasional cigar smoker between a $20 cigar and a $30 cigar. But are cigars even popular enough to amount to any revenue? It seems like this measure could raise at most a billion per year (barely enough to pay for 3 days of the police action in Iraq).
You have to keep smoking — For the Childrenâ„¢!
Why shouldn’t wealthy cigar smokers have to pay more, why do cigarette smokers have to carry the burden when both types of tobacco kill? And isn’t the point of the tax to reduce unhealthy consumption that leads to increased govt health costs…I’d rather they taxed every cheeseburger a nickel and spread it out more equitably.
Look at it this way–a lot of people by cigars by the box, especially for special occasions. If you buy a box of 20 five dollar cigars, that would be, under the current law, a total cost of $100.96. Under the proposed law, the cost would be $153.13. That’s the kind of price hike that can lead to diminished sales and depress an industry.
But are cigars even popular enough to amount to any revenue? It seems like this measure could raise at most a billion per year
There’s something like 4 billion cigars sold a year in the U.S., so it’s not insignficant dollars we’re talking about here. Average sales price on a cigar is probably between $5 and 7 (just going by what my local tobacconist sells). Still, not a lot of money gained while faced with the prospect of putting people out of work.
You’re joking right? The difference is quite clear and obvious: $10. Duh.
Is that difference enough to influence a change in a cigar smoker? Depends on the price elasticity of deman. If it is unity, then it will decrease demand by a proportion equal to the increase in price. Did you skip micro-economics or fall asleep when the instructor went over price elasticities?
That depends. A tax on $0.01 per cigar would have little effect on demand, but still generate some tax revenues. A tax of $5000/cigar would pretty much mean the end of that market and zero tax revenues.
I heard that the bill includes a 50 percent tax on cigars held in stock at the distibutor to be paid before being shipped to the retailer.
Seems like the luxury yacht manufacturers all over again.
Alex, count me not sympathetic.
As I see it you burn up a $5 dollar bill several times a month.
If the government want to tax you $2.50 for every fiver you burn then who really cares?
I mean really, put things in perspective here.
You pay five bucks to put some foul smelling rolled up tobacco product in your mouth and then light it on fire and stink up the place and yet you think it an outrage to pay seven fifty for the same pleasure? Hah.
If the government want to tax you $2.50 for every fiver you burn then who really cares?
So because I share a hobby that you don’t, you think it’s okay for the government to tax the hell out of it? How would you like it if the government slapped a 50% tax on something YOU enjoyed?
The feds are already blocking imports of the world’s best cigars and now they want to ramp up the tax!
No respect!
Hey Ken,
I bet you also “burn” $5 several times a month on something you enjoy.
How about a $2 tax on every Starbucks latte? I mean it’s not like caffene is good for you, and people are just throwing money away paying for those $4 drinks that could be used on other things
A sushi tax might also go down well. Not everyone enjoys raw fish, and you can get sick eating it. Plus many people find it disgusting. So how about a $2 tax per piece?
Of course the big revenue raiser is the french fry tax. Here is government at its finest by raising revenue and forcing its minions, I mean citizens, to act in ways it wants. And no one “needs” to eat french fries. They are universally bad. Everyone can eat carrot sticks instead.
Everybody pays a huge tax on almost any prepared food item due to the government subsidy of corn and tariff on imported sugar. Lots of things are taxed heavily so you’ll have to excuse my lack of sympathy.
If you think a 50% tax on cigars is bad, you should be thankful they don’t lump tobacco in with hemp and just outlaw it altogether.
Which is why I want to impose a extremely heavy tax on anybody posting on the internets using the name “ken”. After all, I don’t do that so why should I care?
Yeah, what a jerk!
So Steve, you really are pissed off that instead paying five bucks to send a few ounces of tobacco up in smoke you are going to have to pay seven bucks fifty instead?
What’s the difference? In the end you still end up with nothing but foul air. I don’t see that it matters how much you pay for that particular enjoyment.
It is still a dumb thing to do regardless of the cost. But if that is what you want to do I see no reason why you would enjoy it any less for having paid more.
Alex, yeah I think it is OK to tax someone for burning tobacco.
If you don’t like it then don’t buy tobacco.
And if the government was going to ‘slap a tax’ on something I enjoyed I wouldn’t care that much unless it was a necessity. They could tax movies, for example, which I go to several times a year if that is what was needed for some worthwhile social good. Taxes are the price one pays for a civilized society. Grow up and deal with it.
I’ve ‘burned’ a steak or two when bar-b-queing.
As a rule I don’t buy things with the intention of burning them.
But if I did I sure wouldn’t complain about how much I had to pay for it.
I might be if I smoked cigars. What is more worrisome is that it is probably going to seriously reduce this market and put firms out of business and make people unemployed.
Yes, we all know you don’t care about the people who work in that industry ken, you’ve made that abundantly clear.
Taxes on anything I consume mean that I have less money over all to spend which means that overall I’m worse off. The only way to counter this loss of welfare is to have the government do things that enhance my welfare. Generally, I don’t think the government does that.
Taxes are, at best, a necessary evil, but that doesn’t mean that whenever a new tax is imposed people should just “deal with it”. Good thing the Founding Fathers didn’t share your sentiments ken. Too many taxes can be a bad thing as well. Stupid taxes can be an even worse thing. As somebody mentioned the tax on yachts nearly destroyed that industry putting many firms out of business and many workers became unemployed. I know, I know, who cares about the rich snobs who build yatchs (of course, lets ignore the question if they are rich then why are they still working) well apparently Patrick Kennedy did when he sponsored a bill to provide a subsidy for the yachting industry by giving those rich peopel who do buy yachts a tax credit.
Steve, the tobacco industry should fail..
So yeah, if we put them out of business by reducing tobacco use then we’ve done good.
There is not a single job in the tobacco industry worth saving at the cost of ill health for people who use their products.
Ken, you eat meat, my world view, it shakes!
Federal taxes on cigarettes amount to about 10%. Cigars were lagging far behind this. I see nothing wrong with bringing the taxes on cigars up, but this does seem to have overshot the mark.
Re: American jobs
How much of a cigar industry is there in the US. I don’t know much about cigars, so I end up taking the advice of others when I have the occasional cigar. Now that generally means I smoke Cubans. The only American cigar I have ever had was one that was rolled by a friend of my fathers who grew his own. My memory is that the few American brands I have seen are generally on the low end as far as price and so might be hurt less than foreign brands. It doesn’t seem to me that this will have much if any effect on American jobs.
How much of a cigar industry is there in the US.
In the grand scheme of things, there isn’t a lot of cigar manufacturing in the United States, but there are a lot of cigar retailers, and this tax is almost certainly going to affect them detrimentally.
I know of at least three small shops in my area that would close their doors putting about 15 to 30 people out of work and some of the larger stores that have a humidor as part of their operation would consider getting rid of their humidor by the end of the year. This is because a retailer is responsible for paying the tax on all inventory that he holds at the end of the year.
There are several cigar manufacturers that still roll cigars in Florida and these are mostly small family owned operations.
This tax would destroy small businesses.
Thanks for the link.
Putting a tobacco vendor out of business is like running the massage parlors out of town. On balance when we force the closure of these businesses we improve the business environment for decent people.
Maybe we should change the Declaration of Independence to read, “… and the pursuit of happiness, as long as Ken approves of it as fitting for decent people.”
On balance when we force the closure of these businesses we improve the business environment for decent people.
“Decent” defined as “people who have only the same hobbies, lifestyle, and opinions as Ken”, right? Perhaps we should change all restaurants to Taco Bell, outlaw swearing, and only sing classic commercial jingles, as well.
Ken provides a very useful service.
He is a walking reminder that despite all of the PR about tolerance and liberty, liberals like him are the biggest control freaks in existence.
If they had the power they would be happy to control the smallest details of your life.
Polish the surface of a liberal like Ken and you find a petty little dictator in waiting.
I think Coffee House Commissar is the sobriquet of choice.
Liberals typically take strong stands against the vices that destroys lives and harm families.
Conservatives on the other hand defend prostitution and tobacco pushers.
Your arguments in defense of these enterprises is to equate them with food sellers. Get real. If you don’t know the difference between someone selling nourishment and someone selling tobacco addictions or sexual disease then pity you.
There are things mature people make distinctions on. Conservatives should learn that.
Spoken…errr written like a true Nanny Stater. “I don’t like what those people are doing, so I’ll make them stop.”
Ahhh screw them, they’re evil. ken told us so.
ken the moralist strikes again. You and Jerry Falwell apparently did have something in common.
Good catch Alex. However that movie was satire, with ken I don’t get the feeling he is just joking around.
Which is why so many liberals have endorsed the War on Drugs. Funny how they bemoan the attacks on our freedoms at the hands of the Chimperor, but seem to ignore similar attacks at the hands of their preferred politicos.
I have to admit, this one did register on the irony meter, but then I figured it was just a coincident. Yeah, conservatives defend prostitutes.
Yeah like freedom is only good when you don’t practice that freedom. C’mon ken fess up, you are actually Dinesh D’souza trolling through OTB.
What’s a bum, like Roger Miller’s ” King of the Road” gonna do for a smoke?
“Old stogies” are going to be hard to find!
There we go AGAIN, putting the burden on those that can least afford it!!
That’s a keeper.
Ken,
I don’t know that Republicans defend prostitution. I think they just defend their own when they are caught with prostitutes.
Tobacco does have detrimental effects on those who use it just as alcohol, caffeine, junk food and many other things common in our and other societies. Freedom includes the freedom to do yourself harm as long as that harm does not extend to others. Unfortunately both the left and the right both attack this notion from opposite ends, all the while accusing the other side of limiting our freedoms.
lol