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The Cigar Industry Needs Your Help!

That is precisely what would happen if the Senate Finance Committee has their way. The Senate Finance Committee has already approved a 53% tax on cigars, including an over 2000% increase in the cap (the cap is irrelevant, however, as today 95% of cigars imported will not meet that cap).


 

DO YOU WANT TO PAY $80 MORE FOR A BOX OF CAO BRAZILIA AMAZONS?!

That is precisely what would happen if the Senate Finance Committee has their way. The Senate Finance Committee has already approved a 53% tax on cigars, including an over 2000% increase in the cap (the cap is irrelevant, however, as today 95% of cigars imported will not meet that cap).

This Bill comes to the floor for a full vote this week. We need your help. We urge you to contact your local state representatives immediately and implore them to vote against this Bill. If passed, cigars would become the highest taxed item that is subject to an excise tax in the entire Internal Revenue Code. The ramifications of this Bill could potentially eliminate the premium cigar industry as we know it today.

For your convenience, we have provided a form letter (see below) for you to cut and paste and forward to your local state representatives. Please GO HERE for a contact list of U.S. Senators with phone numbers, email addresses, and fax numbers.


Dear Congressman:

As a constituent and supporter of yours, I wanted to discuss an issue of grave concern that will be brought to the House floor this coming week. I would not waste your time if this were a manageable concern--I know full well that you receive constituents' complaints daily. But what is being proposed now is simply unconscionable and requires your immediate attention.
 
Funding for SCHIP is proposed to come from increased cigars and cigarette excise taxes. The cigar excise tax portion of the funding for this $35-billion program is outrageous.  To say the impact on this industry will be significant is an understatement.  Across the nation 8,000 to 10,000 cigar industry jobs in America, not to mention those in neighboring countries (well over 100,000+ jobs in Central America) that supply and depend upon the handmade cigar market in the U.S. are in immediate jeopardy.
 
The House Ways & Means Committee has already approved a 44% tax on cigars, which represents on average a 780% increase in the tax on cigars, including a 2,000% increase in the cap from $0.05 to $1.00 (the cap is irrelevant, however, as today 95% of cigars imported will not meet that cap). The Senate Finance Committee has already approved a 53% tax on cigars and an even greater increase in the cap. This Bill comes to the floor for a full vote this week.  We need your help. The massive increase is nothing short of punitive - with the stroke of a pen, Congress would cause the $900 million industry to atrophy overnight, taking not only direct jobs and other tax revenue away such as income, payroll, and property taxes, but the economic activity which is spread to ancillary suppliers like printers, delivery companies, truck drivers, etc.
 
Consider that a bottle of vodka, for example, is taxed at just 8.5% and a can of beer just one nickel. If passed, cigars would become the highest taxed item that is subject to an excise tax in the entire Internal Revenue Code (the next highest rate is 12%). The cigar industry is small at $2.9 billion (handmade cigars $900 million). Compare that to the cigarette industry which is $82 billion. Cigar companies are largely independent "mom-and-pop" companies, not the large conglomerates cigarette companies are. Of course as you know, cigars and cigarettes are vastly different animals with different consumption patterns and health effects; I donít believe any one is addicted to cigars. Last year, cigar sales were less than 2% of total cigarettes sold by volume (and less than 0.5 percent of cigarette sales in dollars). Cigar consumers will simply quit or cut consumption as demand for cigars is extremely elastic. Furthermore, punitive taxes will only lead to illicit purchasing from foreign Internet dealers by consumers, and it is likely to create criminals out of normal business owners who will have a major incentive to cheat. Thus, due to the elastic demand for cigars and immediate negative impact on our industry, relying on cigar taxes for revenue is a complete house of cards.
I believe that the maximum acceptable tax for the cigar industry to absorb would be to raise the excise tax an enormous 200% to $0.15 per cigar (capped at $0.15); this industry may then have a reasonable chance of remaining stable. I might also point out that it is a potential violation of CAFTA.

One may feel compassionate funding health care for the children of middle-income parents, but please remember the thousands of people who have food on their tables thanks to the independent cigar craft industry. It is the opposite of compassion to take food off the tables of Americans and small business owners while eroding the tax base and to eliminate good-paying jobs in Central America which only increase incentives for illegal immigration.
 
Thank you for hearing my case; I am asking you to be an advocate for the tens and tens of thousands of jobs that rely on this industry, 75+ industry suppliers, and meóa person who enjoys a premium cigar from time to time. 
 

 
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