April 17, 2008
The (up to) 6,000% increase in federal cigar excise taxes that Congress proposed in their $35 billion SCHIP bill (State Children’s Health Insurance Program) last year to help provide health insurance to children of needy families would have devastated our industry. Can you imagine the impact on your business if you had to raise your retail prices $6.00 + per cigar (assuming you keystone your margins)? All of us would be looking for another line of work. But had it not been for the Republicans in the House of Representatives who sustained President Bush’s SCHIP on two separate occasions, that is exactly what would have happened. We received a “reprieve” last year - but unfortunately SCHIP is not going away.

On April 17, the executive committees of CAA and IPCPR met in Washington D.C. to get an SCHIP update from their respective lobbyists. It is never easy to know for certain what is going to happen in Washington, especially in an election year, but it appears that SCHIP could very well be re-introduced this September or in early October. While a third SCHIP veto would hopefully be sustained again this time, the prospects for passage of an SCHIP bill next year, especially if the presidency and both houses of Congress are controlled by the same party, are very real.

The position of CAA/IPCPR continues to be as stated in their joint letter to Congress dated December 11, 2007, when we went on record that we would accept that same 156% rate increase in cigar taxes (from around a nickel to 12 ½ ¢ per cigar) that the SCHIP bill would increase cigarette taxes (but nothing more). I ask you – has there ever been a time in the history of our country when any American industry stepped up to the plate to ask Congress to raise their taxes by 156%? I think not.

We also agreed to continue our aggressive efforts to communicate our position to key Congressional decision-makers, particularly emphasizing the negative impact that massive excise tax increases would have on the economic viability of our industry. To this end, we are planning a major political fund raiser in Washington on July 22, followed by our next industry strategy meeting on July 23.

What can you do to help? Make an appointment with your local Congressman. Educate him/her about the devastating effect that $6.00 + per cigar increase would have on your business. Tell him/her that you understand that all children need health insurance and that the industry is willing to take a 156% increase in taxes (the same as for cigarettes) – but that’s it.

Good luck. Let me know if I can help.

Eric Newman, Chairman
Cigar Association of America

While we have made some progress in our fight to eliminate (or at least moderate) the outrageous cigar tax increase proposed in the pending SCHIP bill, we still have a LONG way to go.

All of us – manufacturers, retailers, consumers - have to continue to tell our elected Senators and Representatives to remove the cigar tax increase and that cigars are already paying their fair share of taxes. To help in this endeavor, we are asking you to display the enclosed “Cigar Smokers Already Pay Their Fair Share” poster up in your smokeshop.

1. Please go to http://capwiz.com/cigarassociation/dbq/
   officials and enter your zip code to get the names of your 2 Senators and Representative.
2. Click “info” underneath the name to get their telephone numbers
3. Write the names and telephone numbers, where indicated, on the poster.
4. Have your customers call these elected officials while they are in your store to ask them to remove the cigar tax increase when the bill comes to a vote again. Your customer should also tell them that cigars are already the highest taxed item in the federal tax code and are already paying their fair share.

Arguments you can make in your email to our elected officials are that

1. Cigars are already paying it fair share of taxes, the same as wine, beer and whiskey
2. At the current 20.72% rate, not only are cigars taxed higher than any other tobacco product (including cigarettes) but they are taxed higher than any product on which federal taxes are levied.
3. Luxury taxes don’t work – the 30% luxury tax Congress enacted in 1990 and had to repeal the next year proved that
4. if the outrageous 6,000% tax increase being proposed (on the cap) is enacted, their won’t be a cigar industry left to tax.
5. There are 40,000 American cigar industry workers and retailers who will lose their jobs and “family farm”.

I have never seen our entire industry ­- retailers, manufacturers and importers - ever pull together for any issue like this before. But it’s going to take this united effort to win this fight. So don’t wait for someone else to fight the fight - do your part. Ask you customer to contact your Senators and Representative today!

Eric Newman, President
J.C. Newman Cigar Co.