Quit Picking on Handmade Cigars

Source from:  smokemag.com By E. Edward Hoyt III 05/29/2008

Taxing the life out of an entire product category makes absolutely no sense. But since when did government make sensible decisions? Last year, 335 million premium, hand made cigars were imported into the United States (a mere drop in the bucket compared to the estimated 10.5 billion strong total domestic cigar consumption). But if it had been up to a newly-successful congressional movement to expand funding to a state-operated health care program for uninsured children known as SCHIP, that 335 million could well have been slashed to a mere trickle, just enough to perhaps accommodate the fickle fascinations of society's super-rich for whom price is no object. The rest of the cigar-smoking population would have been left scratching their heads in amazement how the 5￠ per cigar federal excise tax cap soared to $10 per cigar, unleashing unprecedented retail sticker shock as the cigar tax itself jumped from 20 percent of the manufacturer's selling price to 53 percent. While no inherent friend to the cigar industry, President Bush found plenty wrong with the congressional bills-namely a wide broadening of the program's intended beneficiaries well beyond the original scope. A march towards socialized medicine. In the end, he vetoed it. Twice. The Nicaraguan cigar maker, the Honduran tobacco grower, and the Dominican box maker may not particularly care why he vetoed it-just that he did. But cigar fans and cigar makers may not be so lucky the next time the issue blows through Washington, as it inevitably will when the program's emergency funding extension runs out. Of course, there's a whole list of other reasons why singling out premium cigars-or any other narrow sliver of merchandise-for such a massive tax burden should be unacceptable to any American. First and foremost is the catch-22 nature of the failed bill: if you want to raise revenue to fund a healthcare program, you can't tax one item so astronomically that you wipe out the entire revenue stream. Some other target might be next. The Federal tax on a glass of wine is 5￠, a bottle of beer is 5￠, and 1oz. of whiskey is 9￠, so premium cigars are taxed very much in line with other arguably adult vices. A potentially devastating $10 tax on a single cigar would have been truly unreasonable and totally punitive. But only in the world of tobacco are taxes hiked by such astronomical amounts, yielding incremental declines in usage and thus a need to keep hiking the tax even further to maintain that revenue stream. Enditem