Friday, July 20, 2007


Jul. 20, 2007 (McClatchy-Tribune Regional News delivered by Newstex) --
Your stogies could soon burn up more of your money.

If Congress passes a bill to help states pay for children's health insurance, the tax on many cigars could jump from 5 cents to as much as $10 a stick. Cigar makers said those drastic hikes are enough to possibly shut them down.

The bill, approved Thursday by a Senate committee, especially worries manufacturers in the Miami area, home to an estimated 90 percent of the $311 million U.S. premium cigar industry.

'I would be out of business,' said Marvin Samel, co-founder of Kendall-based Drew Estate cigar company.

What Samel faces: a proposal to expand the State Children's Health Insurance Program, which gives money to states to help families not poor enough for Medicaid pay for health insurance. The Senate proposes raising an additional $35 billion for five years by increasing taxes on cigars, cigarettes and other tobacco products.

Cigarette taxes would jump to $1 a pack from $0.39 a pack. But the biggest percentage jump -- potentially a 20,413-percent boost -- would hit 'large cigars,' those above 3 pounds per 1,000 sticks. The current 5-cent tax could change to a tax of 53.13 percent of the manufacturer's or importer's sales price, up to $10.

'There is no other tax in the Internal Revenue Code at that level,' said Norm Sharp, president of the Cigar Association of America.

The average $5 cigar would cost an additional $2.66. Cigars priced at $18.82 and more would carry an extra $10 in taxes. Most premium cigars -- natural, hand-rolled 'large cigars' -- cost $5 to $10, Samel said.

The bill could go before the full Senate as early as next week.

Healthcare analysts said the tobacco industry shouldn't worry. President Bush already said he plans to veto the expansion, and it's unlikely Congress would override the veto with a two-thirds majority vote, said Bob Laszewski, a healthcare analyst in Washington, D.C.

Still, Miami-area manufacturers are uniting. About 35 manufacturing company owners and executives met Wednesday to strategize about the proposed legislation. The result: a plan to raise about $50,000 to express-mail letters to cigar retailers.

'I got three kids,' Christian Eiroa, president of Miami's Camacho Cigars, told the group. His Cuban-exile father, Julio Eiroa, started Camacho Cigars in 1961. 'I don't know if the industry is going to survive. I don't know how to do anything but this.'

Samel, who moved his company to Miami in 2004, said it's not just jobs in Miami that are at stake. Cigar companies employ thousands of workers in several Central and South American countries.

Worry is already trickling down the chain to retailers. Most cigars in Mauricio Hanono's Absolute Cigar Shop cost $5 to $15, but a 53.13 percent tax on the manufacturer's price -- boosting prices by a couple of dollars -- would mean fewer customers, Hanono estimated. He added retailers like himself would be devastated.

'I have to make my profit,' Hanono said about his decade-old Miami business. 'We will be more affected than the manufacturers.'

But the tobacco industry has a big fight ahead, because many policymakers want to see the industry combust, Laszewski said.

'If [cigarmakers] stand up and say, 'It's going to put me out of business,' there are a whole lot of people in Washington, D.C., who are going to say, 'Great news,' ' he added.

Funding for the children's health insurance program is set to expire September 30, and lawmakers and healthcare industry members are looking for ways to keep it going.

'Health insurance costs money,' said Abigail Vladeck, policy director for the Human Services Coalition in Miami, 'and that money has to come from somewhere.'

But those in the cigar industry said the money shouldn't come from them, and they plan to lobby local Congressmen about the legislation.

South Florida politicians already are working on the issue. Sen. Bill Nelson (D-FL) said he supports bolstering the healthcare program.

'Children have to get basic healthcare in order to be good students and have a chance in life, so I'm inclined to vote for increased funding for the program, if it gets to the full Senate,' Nelson, a co-sponsor on the SCHIP bill, said in an e-mail. But, he said, the current proposal is likely to be changed, so he is waiting to decide whether he will support it.

Sen. Mel Martinez (R-FL) is working with several Republican senators to introduce an alternative SCHIP plan within the next two weeks, spokesman Ken Lundberg said.

The likelihood of the tax increase happening?

'We never predict success,' the cigar association's Sharp said. 'This is a matter of survival to the industry.'

Newstex ID: KRTB-0123-18278162


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