Originally Posted by me

There has been buzz in the media regarding the Senate's S-CHIP legislation that would be funded by a 220% increase in cigarette taxes, from 31 cents to $1.00 per pack. And while children’s healthcare is a worthy and noble endeavor what has sadly been overlooked is the fact that this legislation would increase federal taxes on premium cigars up to 20,000%.

The Senate's current plan increases the tax on premium cigars from 5 cents a cigar to a maximum of $10.00 per cigar. The effect of such an enormous, disproportionate tax increase will be devastating to an industry populated by many small business owners.

For example, a typical handmade cigar that is imported for $9.00 currently pays a federal tax of $0.04875. If this tax increase is imposed, the new federal tax on this same premium cigar will be increased to $4.6017. This represents a real tax increase of well over nine thousand percent.

Unlike the cigarette industry that is controlled by mega-conglomerates, the cigar industry is heavily populated with small family-owned companies that have been working through generations. Virtually all of the major tobacco growers, suppliers, manufacturers, distributors, and retailers are small, family businesses.

In addition to this astounding increase in taxes on new sales the Senate proposal includes a hefty Floor Tax. Specialty cigar retailers would be forced to pay the increased tax on all existing inventory next spring. Requiring specialty cigar retailers to pay tens of thousands of dollars in taxes will force many of them to close nationwide.

A 20,000% tax increase is not only grossly unfair but ultimately unsupportable, as it will cripple and destroy much of the premium cigar industry along with many of the old family, small businesses that have worked hard to survive the changing and difficult marketplace.