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.