Valley
cigar stores, that are by now suffering from an unstable economy are
getting ready for a big increase in federal tax next month which they
dread will further reduce sales.
With
starting from April 1, taxes levied on large cigars will be 40 cents on
each cigar. That is to say, the Congress had thought, higher from a
nickel per cigar, although lower than a tax of $3 to $10 for each cigar.
For example, a 5 cent cigar would cost approximately double to 9 cents
under the increase in tax on small cigars.
An owner of a cigar store in Phoenix says that politicians have always gone after sin taxes correctly or incorrectly.
In
the beginning of February, Congress authorized the increase in tax on
cigars and additional tobacco products to raise an amount of $35 billion
for health care for children who are uninsured.
According
to industry assessments, this increase in tax could not be implemented
at a more distressing time for the cigar industry that yields 333
million handmade cigars and 6 billion machine rolled cigars.
The
cigar stores increased in the Valley when the economy was booming in
the mid-2000s. A Tobacconist says that the number of cigar stores
increased from around 15 to 70 recently in the past decade in the
Valley. Now the large number of stores has divided the customer base,
making some cigar stores to close down and other stores in the market to
worry about more reduction as the economy persists to stumble. Another
store owner, whose store exists since 1958 thinks that there are more
cigar stores per capita than any other place in the US. He adds that
many stores have already shut down and all the cigar store owners are
fighting for bits.
The
perception is that consumers are going to respond to the increase in
tax by purchasing lower priced cigars. Policymakers have time and again
utilized sin taxes on alcohol, tobacco and other such products to
increase revenue. In this particular case, industry officials and owners
of cigar shops state that they are not against health care sponsored by
the state for children, but they criticize that smokers are being
wrongly discriminated to sponsor the program. Another owner argues that
taxing a deteriorating industry, will generate less revenue for the
children’s health care program over a period of time.
The
legislative director for IPCPR (International Premium Cigar and Pipe
Retailers Association) has the opinion of taxing soda and candy due to
the increasing problem of childhood obesity. He adds that tobacco is an
easy prey for policy makers to go after as smokers form merely around
20% of the US population. The IPCPR association stands for 2000 members
throughout the world.
Nowadays,
amid smoking bans, cigar lounges and shops have come out to be like
traditional barbershops, where mainly male customers can enjoy
companionship and fine cigars, a rather reasonable luxury item. People
think of wealthy attorneys and bankers when they imagine cigars. This is
the biggest contradiction, says McCalla, the legislative director for
IPCPR. He adds that there is an extensive demography of cigar smokers
who will be affected by the increase in tax.
Store
owners in the Valley do not anticipate a vast increase in sales this
month to escape the new tax since most cigar smokers’ purchase in small
amounts. Probably they will search for discount cigars and accessories like cigar caddy in cigar auctions.
