SCHIP Leads to Closure of Cigar Factory
I was on Twitter last night (@Travis_Lindsay) and I saw this Tweet from @taxfoundation about a cigar manufacturer closing down due to a new tax, SCHIP. Here is the important part of their post:
Tampa will lose part of its cigar heritage in August when Hav-A-Tampa shuts its factory near Seffner and lays off about 495 employees, closing a factory that has been operating since 1902.[...]
However, the company attributed much of its trouble to the State Children’s Health Insurance Program, or SCHIP, a federal program that provides health insurance to low-income children. It is funded, in part, by a new federal tax on cigars and cigarettes. McKenzie couldn’t say how much sales of Hav-A-Tampa cigars had fallen off, but the numbers have dropped significantly, he said.
Previously, federal excise taxes on cigars were limited to no more than a nickel, said Norman Sharp, president of the Cigar Association of America trade group. The tax increase, which took effect April 1, raises the maximum tax on cigars to about 40 cents, Sharp said.
Hav-A-Tampa cigars aren’t premium cigars so I personally won’t be affected by this closure but, still, 500 employees is 500 employees and there were people who did smoke these wood-tipped cigars. It’s too bad that SCHIP has caused this company to close. I just wonder how this will affect the “jobs saved or created” metric and what other small scale cigar companies will eventually close because the taxes are too injurious.
SCHIP – It’s for the “Kids”
A couple of items. First, I would like to direct all readers to my new tag line: “Smoking Cigars for the Children.” The second item will explain the change.
From Smoke Signals:
The federal tax on large cigars is being increased from $.045 to 52.75% of wholesale price with a cap of $.4026 per cigar (significantly less than the $3/cigar cap originally proposed).
-There will be no floor tax on large cigars, but a wholesalers/retailers will be required to remit a tax on all floor inventory of other tobacco products.
As long as the price of the cigar is more than $0.80 (and what cigars aren’t more expensive than that?) then your tax/stogie just got nine times larger. For a box of 25 cigars that’s over $10. Yikes!
But children isn’t really all that true, now is it? SCHIP doesn’t protect children only because more than 10% of the “children” in SCHIP are over 18. And that’s just how many are currently enrolled in the program!
And don’t think SCHIP actually helps those who cannot afford health care. When Hawaii did something similar to SCHIP (e.g. the government paying for health care for those above the poverty line but “too poor” to buy their own health care) “A staggering 85% of children enrolled in Keiki Care had been enrolled in private insurance programs.” SCHIP will cover families of four who make up to $61,950 per year!
