The Stogie Guys

This morning President Bush carried through on his promise to veto the SCHIP bill which contained large tax increases on tobacco. The veto ceremony took place quietly before he left Washington to travel to Lancaster, Pennsylvania.

The veto, which is only the forth of Bush’s presidency, stops a 256% increase of the excise tax on cigars to 53%. The proposed tax also raised the cap on from 5 cents to $3 per cigar. The combined effect would have raised the price of many premium and ultra-premium cigars by $100 or more per box.

While many in the cigar industry will applaud the veto, Bush has spoken little about the tobacco taxes. His opposition to the bill has instead been focused on a desire to halt expansion of SCHIP to children of families whose income levels are far above the threshold for government assistance. While not cited specifically by Bush, other critics of SCHIP expansion cite as an example this New Jersey family who, with assistance from SCHIP, can to afford to send their daughter to a nearly $10,000  per year private school.

As we reported earlier, SCHIP supporters in the Senate appear to have the votes to override the veto. However, the House remains short of the two-thirds threshold, meaning that at least for now cigar taxes will remain the same.

Stogie Guys Analysis

Unfortunately, cigar smokers and others who oppose these excessive and punitive cigar taxes should take little solace in this outcome.

Yes, Bush vetoed the bill, and yes they seem able to muster enough opposition in the House to sustain the veto, but this will still be very damaging long term. Anti-tobacco forces now have majorities in both houses on the record supporting large tax increases on tobacco.

So, the next time the government wants to raise taxes on tobacco, all these politicians will be on the record in support of it. Any one who changes their vote in future can be accused of “flip-flopping.”

This can (and likely will be) damaging in the future when Bush isn’t there to veto such tax increases. Right now it looks fairly likely that the next White House occupant will support raising tobacco taxes. (All the Democrats supported this increase and even Republican hopeful Mike Huckabee has indicated he is in favor of taxing/banning tobacco.)

That’s why, even though the current tax hikes might not get through, this is a very bad loss for adults who want to be able to enjoy cigars with out paying outrageous taxes on these legal products. Also, as George expressed in his commentary on Monday, the cigar industry should have done a better job on this issue.

–Patrick S

Tags: cigars

It has been well over a year since we first reported that Fidel Castro was relinquishing the reins of his communist regime to battle an “intestinal crisis” and cope with “imminent death.”

Not unlike his track record of nearly 50 years of political stability, the embattled Cuban dictator has outlasted all our predictions and, as far as we know, is still breathing some 15 months later. Clearly, we here at StogieGuys.com are better at writing about cigars than prognosticating about intestine-related medical complications.

But just because Fidel is still alive doesn’t mean he’s ready – or ever will be again – to take back control of the island nation. El Presidente hasn’t made a public appearance in over a year, and the video released last week shows him frail and lacking that certain zest you expect from a totalitarian leader who’s responsible for countless human rights violations.

So we turn our attention to his brother, Raúl. In August, I wrote, “It’s true that we can’t expect major reform from Raúl – who has been at his brother’s side from the beginning – anytime soon, but many foreign policy experts believe he is more pragmatic than Fidel, and therefore more open to economic reforms.”

Castro’s death certainly will not instantaneously lift America’s decades-long trade embargo, but Cuban economic and political reforms will go a long way towards that end. In that spirit, here’s the recent buzz on Raúl from some major media outlets.

1. Latin Business Chronicle: “Cuba will initiate some degree of economic reform – including more space for private economic activity – during the coming year…[Raúl] stated a need to examine and expand the practices that work in the agriculture sector, which would imply an expansion of private farming, where productivity is highest. He called for increased foreign investment. He called for ‘structural changes’ which, in Marxist terms, could imply a change in property relations and a selective shift away from state ownership.”

2. Reuters: “Raúl Castro has repeatedly called for more debate and constructive criticism. He also demanded studies from experts on reform proposals to raise productivity, including on the state’s ownership of the economy, which exceeds 90 percent.

3. Houston Chronicle: “The younger Castro, 76, said last week that Cubans shouldn’t be afraid to speak their minds about economic reform, saying they should do so ‘with bravery, with sincerity, without many illusions that we are magicians and are going to resolve problems.’ Raúl Castro is said to be impressed by China’s market-oriented reforms.”

These encouraging market-oriented reforms, at this point, are only speculative in nature. Still, Americans who wish an end to our hypocritical trade embargo can’t help but feel optimistic.

–Patrick A

Tags: cigars

I’ve been frustrated in recent months watching the failed efforts to combat the higher cigar taxes that are part of the proposed State Children’s Health Insurance Program (SCHIP) expansion. I have no connection to the cigar industry — other than enjoying its products — and I don’t claim to have observed everything that occurred. But I do have a little knowledge about how Congress works, and it often appeared to me that tobacco’s resistance was not as effective as it could have been.

So, I thought I’d offer my suggestions for the future.

1. First, and foremost, get a godfather. The cigar industry needs someone to watch over it and take up its interests the way Sen. Orrin Hatch (R-UT) guards the vitamin/supplement industry or Sen. Chuck Schumer (D-NY) takes care of Wall Street. Lacking a powerful, savvy ally who is committed to your view is like being in a hatchet fight without a hatchet.

2. Concentrate on the tax. Much of the recent discussion about the cigar tax actually veered off into whether the concept of SCHIP is good or bad. Forget that. Don’t get drawn into politics. As you hear in DC almost every day, “Stick to your knitting.” For the cigar industry, the issue is the size of the cigar tax, not what it would be spent on. Let others argue about policy. Remember, when you’re counting votes, there are no Democrats or Republicans, only “yeas” and “nays.”

3. Don’t encourage Astroturf campaigns. If there’s one thing legislators know, it’s communication. Most ignore form letter communications, whether via email or fax, so constituents must make their voices heard individually by communicating their own points in their own emails, phone calls, faxes, and letters. Personal, grassroots efforts can be effective. Astroturf is not.

4. Be realistic. There is a large, powerful, not-very-reasonable anti-smoking movement out there. Cigar smokers are a small group. Recognize those facts and deal with them, rather than complain. In my opinion, some tax increase is inevitable. I’d suggest working to keep it as small as possible and trying to get other things you want along with it.

5. Increase congressional awareness. Organize congressional trips to the Dominican Republic, Nicaragua, and Honduras so lawmakers can see the plants, talk to workers, and get a feel for the economic impact of cigars in those nations. Back home, make sure every representative and senator knows all about the jobs related to cigars. And not just in shops and in Florida, but with operations like Finck in Texas, National in Indiana, tobacco farmers in Connecticut, etc.

6. Spend wisely. I’m not inclined to tell others how to spend their money. But I would suggest that employing lobbying and PR firms intimately identified with the GOP might not be the wisest course when both houses of Congress are now controlled by Democrats.

7. Stay alert. Getting surprised by a tax proposal shouldn’t happen. The best time to have an impact is before anything is committed to paper, so stay on top of it every day.

–George E

Tags: cigars