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Old August 5th, 2007, 03:29 PM
Lakemonster's Avatar
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Hookah Enthusiast
Join Date: May 2007
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Default 156% tax hike on shisha in the US?


Looks like they might hike pipe tobacco and shag... dont think they will forget about us either.... they wont miss a chance to tax a tobacco product, especially if they are upping the taxes of cigarette papers and tubes as well.

One vendor has already voiced concern on the matter.

see General Yada Yada for a related article.

NATO: Hike in federal tobacco tax would be unfair

Monday, July 30, 2007

A proposed increase in the federal tax on cigarettes and other tobacco products is unfair, said the National Association of Tobacco Outlets in letters to U.S. senators and representatives.

Below is a copy of a July 27 letter that the association’s director, Thomas A. Briant, sent to Senators (a similar letter was sent to members of the U.S. House of Representatives):

An inherent characteristic of any tax is that the rate of the levy should be fair. As you review legislation to reauthorize and expand the State Children’s Health Insurance Program (SCHIP), we ask that you give careful consideration to the unfairness of the proposed tax increases on cigars, pipe tobacco, smokeless tobacco, roll-your-own tobacco and cigarettes.

While Congress has the constitutionally granted power to tax, the proposed tax rates on tobacco products passed by the Senate Finance Committee are clearly a case of over taxation. Moreover, many retail tobacco store owners that are members of NATO have questioned whether these proposed rates constitute an abuse of the taxing power. To be clear, NATO does not oppose the reauthorization of the SCHIP program. Rather, our concern lies with the overzealous tax increases being proposed on tobacco products to fund the SCHIP program.

When the proposed tax rates are examined from a percent increase point of view, you can begin to understand why adults who use legal tobacco products are angered and outraged by these excessive and punitive tax rates. For example, current federal law taxes a large cigar at a rate of 20.719% of the manufacturer’s price with a maximum tax or “cap” of 4.875¢ per cigar. The Senate SCHIP reauthorization plan would increase the rate on large cigars to 53.13% of the manufacturer’s price and raise the cap to $10.00 per cigar.

By raising the cap to $10.00, the maximum tax on a cigar would be 20,000% higher than the current tax on a cigar. This 20,000% percent increase in the cigar tax would equate to the federal excise tax on a twelve ounce can of beer increasing from the existing five cents a can to $10.00 per can or $60.00 on a six pack.

The astronomical percentage increases in the tax rates do not stop with cigars. In terms of cigarettes, the proposed tax would increase by $.61/pack from the current $.39/pack to $1.00/pack, a 156% increase. Likewise, the tax rates on pipe tobacco, snuff, chewing tobacco and cigarette papers and tubes will rise by 156% while the tax rate on little cigars will increase by 2,400% and the excise tax on roll-your-own tobacco will rise by 713%. The magnitude of these tax rate increases is unconscionable and has sparked outrage among citizens and retailers alike. In the history of the United States, has there ever been such an enormous tax increase on a single product?

While it may be politically popular to target tobacco products with such huge tax increases, fairness and responsible use of the taxing power need to be a part of the debate. Since public testimony was not allowed during the Senate Finance Committee’s mark up hearing on the SCHIP reauthorization bill, the voices of adult tobacco consumers and the retailers that own tobacco stores need to be heard through phone calls, e-mails and letters. NATO is a voice for tobacco stores and the more than 45 million adult consumers who smoke or use tobacco products and we are writing to you again to urge restraint and common sense regarding the funding of a SCHIP expansion.

These tax increases are not about “Big Tobacco”. Rather, the taxing power is being used to influence personal adult behavior. This “social engineering” through taxation is not good public policy. If any tax increase is enacted into law, it will ultimately be passed onto the consumer. The consequences of these tax increases, whether intentional or not, will put family-owned retail stores out of business, employees will lose their jobs and the black market for tobacco products will flourish at these exorbitant tax rates. Moreover, the personal safety of innocent store employees will be jeopardized because the higher cost of tobacco products will surely generate more robberies and thefts.

To add insult to injury, the Senate bill contains a floor stocks tax provision requiring wholesalers and retailers to pay the difference between the current and higher tax rates on all of the tobacco products they have in inventory on January 1, 2008. The amount that retailers would owe for a floor stocks tax would be simply too much for many independent store owners to afford and they would be forced to close their doors.

Former U.S. Supreme Court Justice John Marshall once said, “The power to tax is the power to destroy”. The proposed tax increases of more than 156% and upwards of 20,000% are destined to destroy the freedom of Americans to enjoy legal tobacco products and the right of Americans to earn a living by operating family-owned retail stores.

We urge you to find an alternative funding source for the expansion of the SCHIP program and avoid the destructive outcome of enacting unjust and punitive tobacco taxes.

Sincerely yours,

Thomas A. Briant
NATO Executive Director

Source: National Association of Tobacco Outlets
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