Rush Limbaugh, Cigar Tax Increase, Talk Radio

THE LIMBAUGH TAX?

Proposed Increase Could Target Talk Titan, Cigar Industry







Have Democrats in Congress finally found a way to tax Rush Limbaugh directly?

With a whopping 20,000% cigar tax increase on the agenda, the answer appears to be yes. More than that, their proposal appears aimed at reviving the very sort of class warfare they've been known for in the past. Cigar smoking is generally considered to be favored by the wealthy.

In the meantime, however, how will small business be hurt by what could be the biggest tax hike in American history? From James Thorner in the St Petersburg Times:

As part of an increase in tobacco taxes designed to pay for children's health insurance, the nickel-per-cigar tax that has ruled the industry could rise to as much as $10 per cigar.

"I'm not sure in the history of man, since our forefathers founded the country in 1776, that there's ever been a tax increase of 20,000 percent," said Newman, who runs the Tampa business founded by grandfather Julius Caesar Newman. "They had the Boston Tea Party for less than this."

When it comes to tobacco sales, cigars are just a speck compared to cigarettes. In 2006, the nearly 400-billion cigarettes sold domestically dwarfed the 5.3-billion cigars.

But cigars are intertwined with Tampa's lineage.

Though the local industry has shriveled from foreign competition and domestic consolidation, cigarmaking still employs more than 1,000 in Tampa. About 900 work at the factory, offices and warehouse of Hav-a-Tampa, owned by foreign tobacco giant Altadis.

Newman machine-makes 35,000 cigars a day at 16th Street and Columbus Avenue and imports hand-wrapped varieties from Latin America. He estimates Florida makes or imports 80 percent of the cigars consumed in the United States and predicts devastation if the new taxes are approved this summer.

Many casual smokers are well heeled enough to plunk down $10 for a premium puff. But would they pay $15 to $20 for the same pleasure?
"Why don't we just go out of business?" Newman said. "Here, you can run our company, Mr. Government."

Here's the source of the controversy: The Democrat controlled Congress has sought an extra $35-billion to $50-billion for the state children's health insurance program. The program distributes payments to the states to help buy coverage for kids not poor enough for Medicaid.

Cigarettes, which accounted for more than 95 percent of tobacco tax collections last year, are the main focus of the bill. Federal taxes on a pack would jump from 39 cents to $1.

But the legislation has dragged cigars along for the ride. The industry operates under a 4.8 cents-per-cigar tax cap.

Under the proposed bill, taxes on "large cigars," a category that includes all but the tiny cigars sold in 20 packs like cigarettes, would rise to 53 percent.

A U.S. Senate version of the bill under consideration today in the Finance Committee sets the maximum tax per cigar at $10.

"We are a very small industry. We're the fly. The cigarette industry is the elephant as far as tax collections are concerned," Newman said. "We've been roped in with conglomerates that own cigarette companies."

As talk radio and cigars have long had a close association (there is even a cigar talk show that airs on weekends), Limbaugh's friend is right on the money here:

RUSH: It's for the children. In the name of saving the children, big government has targeted yet another industry to destroy.

CALLER: So the Winston Churchill that I just started smoking cigars with is going to go from $10 to $20 each.

RUSH: Oh, I know. The maximum cigar tax will be $10 a cigar. It's now at 5¢. The cigar industry as a percentage of the whole tobacco industry is like 2%, if that. This cigar tax increase is sort of hidden in here. Well, it's not hidden anymore, but the bill is written to make it look like it's really a tax that's targeted on cigarettes. The tax on cigarettes will go up a dollar a pack from what it is now -- and the cigar thing is even worse, from 5¢ to $10 -- to pay for kids' health care. Cigars have long been ignored as a source of revenue because compared to cigarettes and other tobacco products, there aren't that many of them sold. Somebody has figured out here that there's a whole lot of money to be made. Children's health care?

I thought the tobacco settlements and all the taxes now were used and being directed to children's health care programs. I guess this is children's insurance. There's also -- and I'm not sure about this. The markup on this bill is still happening, but I think, in addition to the $10 a cigar tax, which is going to people these people out of business. It will be like the thing they did on the yachts, the luxury tax.

It'll put these people out of business. People will go elsewhere to find cigars. They'll find 'em. They'll find a way to do 'em. They'll find a way to get 'em to avoid paying this US tax. I'm still checking this out, but I think in addition to the per-stick tax, manufacturers as of January '08 next year, if this thing becomes law, are going to have a 50% tax on their current inventory that's all on the floor of the warehouse, before it gets to the retailers. I'm still checking this, but this is one of the bullet points that I got from somebody who analyzed the bill. So if a cigar company has a million dollars in inventory cigars, then before those cigars can leave for retail he has to pay $500,000 to the United States Treasury -- and this is Democrats, folks. This is who they are. I was telling somebody about this last night. They said, "Why are they doing this?"

"They're Democrats! They raise taxes."

This friend said, "No, this is aimed at you. You're the best known cigar smoker in the country. This is like the Limbaugh tax."

It's more than that. These people are trying to put the tobacco business out of business without doing it via legislation under the guys of doing it "for the children." This is what liberalism is. This is what Democrats do. They target businesses that they don't like and they use government to harm 'em, maybe even destroy 'em.

For now, legislation like this might not stand a chance, because Bush will probably veto it. But cigar fans really might want to consider stocking up in advance of the 2008 election.

When this does eventually become law, it's hard to even imagine how many will be smuggled across the border, especially from Canada, where cigar shops catering to Americans are quite common. No doubt the shopkeepers in British Columbia can't wait for this tax hike to be enacted!


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