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Cigar retailers dealing with tax increase

Cigar retailers in Pennsylvania have seen better days.

On Wednesday, the federal tax on cigars jumped about 700 percent. In addition, Gov. Ed Rendell's proposed budget would put a state tax on cigars for the first time.

Yet owners of York County smoke shops said they're not losing any sleep over the new cigar taxes. The reason for that is simple -- things could have been a lot worse for them.

"We ducked a bullet," said Jack Shearer, owner of D.J.'s Westgate Beverage in West Manchester Township, which sells cigars as well as cases of beer.

Which isn't to say that cigar sellers are happy about the new taxes.

"I don't believe in the philosophy of taxing a product that you're trying to eliminate the usage of," said Mark Tucci, owner of Custom Blends in York Township. "It's a double standard that won't work at all."

The new federal tax increases the tax on cigars from 5 cents to about 40 cents on larger cigars, a little less on smaller ones. The revenue will help pay for a health insurance program for low-income children that President Barack Obama signed into law about two months ago.

And that might not be the end of it. Gov. Ed Rendell's proposed state budget would impose a tax of 36 cents for every 10 cigars.

But Shearer said that earlier proposals for the federal tax would have imposed a far higher rate on cigars. Besides, the 700 percent jump is peanuts compared to the 2,200 percent federal tax increase imposed on loose tobacco that people use to roll

Shearer said roll-your-own tobacco makes up a small portion of his sales. He believes most cigar smokers approach them as an occasional luxury, not as a regular fix like cigarette smokers, and he doubts the additional tax will discourage his customers. Bottom line, he doesn't anticipate going out of business because of it.

Still, he finds the tobacco taxes galling and a bit absurd, in light of the fact that the government ostensibly wants people to quit using tobacco, yet bases the funding of important programs on their continued purchase of it.

"If everybody quit smoking, where would they get their money for health care?" he said.

Jesus Castanon, one of the owners of Hain's Pipe and Cigar Shop in York, objects to the tax on principle. He doesn't think it's right that one group of retailers should take on such a high proportion of the cost for social programs.

"They want to put the load of health services for kids on only a small section of society," he said.

But Susan Roberts, policy manager for the Pennsylvania division of the American Cancer Society, argues that it makes sense to have tobacco sellers contribute to health care. Each year, she said, disease related to smoking creates $5.1 billion in health care costs.

Though cigarettes generate most of that, she said that cigars are unhealthy too.

"Any tobacco product is a health threat," Roberts said.

Who smokes cigars?

Cigar smokers in the past have been mainly males between the ages of 35 and 64 with higher education and income.

Most new cigar users today are teenagers and young adult males (ages 18 to 24) who smoke once in a while (less than daily). According to the Substance Abuse and Mental Health Service Administration's 2006 survey, about 12 percent of Americans age 18 to 25 had smoked a cigar within the last month, compared to the average of 6 percent from all ages.

A Centers for Disease Control and Prevention survey reported that as of 2006, about 4 percent of teens in middle school (grades 6-8) had smoked a cigar in the past month.

A 2007 CDC survey that looked only at high school students found that 8 percent of girls and 19 percent of boys had smoked a cigar in the past month. In boys, the numbers doubled between 9th and 12th grade, with 13 percent of 9th grade boys and 26 percent of 12th grade boys saying they had smoked a cigar in the past month.

Saturday, April 04, 2009

Source: York Daily Record

Cigar retailers dealing with tax increase