by Philip Hensley, Jr.
by Philip Hensley, Jr.
Rothbard once stated, smokers really are America’s Most Persecuted
Minority. On February 4, 2009, President Obama (an occasional smoker
himself) signed the SCHIP bill into law, thus continuing the government’s
war on tobacco.
tax on cigarettes is going up from $.39 a pack to $1.0066 per pack.
While the increase will surely hurt the cigarette companies, and
ultimately, the cigarette consumer, the real victim here is the
roll-your-own (RYO) cigarette tobacco industry. RYO cigarette tobacco
has become increasingly popular in recent years, especially as the
economy has worsened, as it was cheaper to roll your own cigarettes
instead of buying a pack of Marlboros. Staying true to the tradition
of big businesses not really favoring less regulation and smaller
government, the lobbyist for big cigarette companies sought and
received the favor of raising the tax on RYO tobacco from $1.10
per pound to $24.78 per pound!
got their money’s worth. Not only did they turn their backs on their
brethren in the tobacco industry, they essentially made it so that
the RYO companies will be put out of business. Not only will it
now be more expensive to roll your own cigarettes, and therefore
eliminate the entire point of rolling your own, but many retailers
and looking to blow out their remaining inventories of RYO tobacco
before the $23.68 per pound floor tax takes effect on April 1. After
that, many retailers are simply going to keep from ordering any
more RYO tobacco and either exit the cigarette business altogether
or simply sell packs of cigarettes.
although not surprising, raising the taxes on tobacco products will
in the long run bring in less revenue to the government. Colorado,
for example, currently has a 40% tobacco tax on the wholesale price
of large cigars. Until four years ago the tax was 20%. A retailer
in Denver recently told me that the last year the tax was at 20%
he sent around $85,000 to the state government in tobacco taxes.
Last year, he sent less than $55,000. Similar stories have been
told to me by other retailers in the state. Individual stick sales
of cigars have remained steady, but sales of cigars by the box has
virtually been eliminated, leading to less sales and therefore less
taxes. Consumers are going online to order boxes of cigars from
retailers or internet-only business from out of state. In many cases,
a consumer can buy a box of cigars from an out of state dealer for
less than a retailer in Colorado can buy it for after he adds in
his wholesale tax.
taxes again and again on tobacco products is not going to put the
tobacco industry out of business. Rather, it is going to drive it
underground and on the black market, as has happened with other
heavily taxed items or items made illegal. Originally, the SCHIP
bill called for a tax of up to $10 per cigar, while later versions
of the bill capped the tax at $3. More than a few retailers have
told me personally that if a tax of $3 were to be implemented on
cigars, they would begin to do cash business under the table with
regular customers that they could trust. The government is driving
legitimate businessmen into situations where they have to act dishonestly
in order to survive. In addition, many stores can no longer afford
to hire additional employees. Because the cost of doing business
in the tobacco industry has risen so much over the past few years,
many cigar store owners are forced to be a one-man operation, whereas
in previous years they could afford to hire employees to help them
run the store for them. Right now is not a good time for the government
to force retailers into letting go of employees.
the cigar industry have stated that they are "thankful"
that the tax on large cigars went up "only" $.35 per stick.
With proposed taxes of $3$10 per stick, they act as if we
should be glad that the government was more "reasonable"
in its approach. However, we should not be gracious to the government
for finding a way to tax us just a little bit more. We should be
demanding that they stop taxing us at all. Because in a few years
when the tobacco taxes aren’t enough to cover the bloated coast
of the current SCHIP bill, there are going to be calls to raise
taxes yet again, and tobacco or tobacco-related industries will
surely be one of the first places they look. We need to put our
foot down now and stop this before the cigar business is shut down
Hensley [send him mail]
is a recent graduate of the University of North Carolina at Chapel
Hill. He currently lives in Durham, NC.
© 2009 by LewRockwell.com. Permission to reprint in whole or in
part is gladly granted, provided full credit is given.