Democrats’ 1121% Tax Increase

Dan Holler

2/11/2013 12:01:00 AM - Dan Holler

That is not a typo.

A group of Democrat senators, none of whom are particularly friendly to law-abiding consumers, have introduced a bill (S.174) that would hike taxes by as much as 1,121 percent on some tobacco products. According to feisty New Jersey Senator Frank Lautenberg, who will be a nonagenarian next year, the bill is necessary because some tobacco companies are “gaming the system.”

Gaming what system, Frank?

Well, back in 2009, one of the first bills President Obama signed was a costly reauthorization of the Children’s Health Insurance Program (CHIP). To finance the expansion of this nice sounding program (which also covers some adults!), Democrat lawmakers increased taxes on certain tobacco products. All together, the tax hikes were supposed to confiscate an additional $72.1 billion from the American people over the next decade, money that disproportionately comes from the poor.

According to Illinois Senator Dick Durbin, some tobacco companies are “changing the labels on their products to avoid paying the higher tax.” CQ News reports Durbin is relying on a Government Accountability Office study that found “manufacturers are seeking to tweak and repackage products to create tobacco products that qualify for the lower tax rates on large cigars and pipe tobacco.”

Companies are not the only ones responding to the intentionally punitive tax increases. Last year, Connecticut Senator Richard Blumenthal expressed disgust that “Declines in cigarette smoking among our youth are only buffered by increases in other forms of tobacco use.”

For those of us who live in the real world, this should come as no surprise. What may be surprising is the proposed solution.

The proposed bill would increase taxes on pipe tobacco by 1,121 percent, smokeless chewing tobacco would increase by 968 percent and smokeless snuff would increase by 789 percent. Taxes on regular and premium cigars could increase by as much as 151 percent. While that may seem like a relative bargain, that 2009 law increased excise taxes on “large” by 700 percent.

For those who love freedom or a fine cigar on a cool summer evening, the Blumenthal-Durbin-Lautenberg bill is not the only threat. There is renewed concern the Food and Drug Administration (FDA) may capture premium cigars in its regulatory dragnet.

As I explained in 2011, lawmakers did not craft the Tobacco Control Act of 2009 to regulate premium cigars. The law focused on keeping cigarettes, smokeless tobacco and roll-your-own-tobacco away from our children. In fact, throughout the congressional debate, “the word ‘cigar’ was mentioned just a hand full of times, and usually to note its ABSENCE from the bill.”

There was a reason premium cigars were not included in the law. As Bill Spann, who heads the industry efforts in Washington, told Roll Call last week, “Our product is not desired by, it is not marketed to, nor is it affordable by underage youth.”

Nonetheless, the FDA plans to release a new rule for public comment in April. The head of the agency’s Center for Tobacco Products said the rule “would deem products that meet the statutory definition of ‘tobacco product’ to be subject to FDA jurisdiction.”

If the FDA decides to treat premium cigars just like cigarettes and the cheap cigars sought by teens, the effect on the industry could be devastating. For example, walk in humidors could be banned, advertising could be curtailed and new, seasonal and vintage blends could be increasingly difficult to bring to market.

And make no mistake, these FDA regulations will destroy American jobs. Nearly four years ago, the city of Tampa saw nearly 500 jobs disappear when Hav-A-Tampa to closed its doors because of the 2009 tax increase.

Fortunately, a spokesman for Representatives Bill Posey (R-FL) confirmed to Roll Call that the congressman plans to reintroduce Traditional Cigar Manufacturing and Small Business Jobs Preservation Act, which would prevent the FDA from regulating premium cigars under the Tobacco Control Act. As I explained two years ago, this is not a handout or a bailout; it is merely an attempt to rein in a reckless bureaucracy and reaffirm the original intent of Congress.

You may not be worried about premium cigars, but you should be worried about tax-and-spend politicians and unaccountable bureaucrats who flagrantly defy the intent of the people you send to Congress. As the old saying goes, give them an inch, and they’ll take a mile.