Sunday, August 26 2007
The CAA has finally posted a website at
www.cigarassociation.org. to help you speak out and fight the proposed SCHIP legislation. On the home page you will see a button labeled "Let your voice be heard." Click it and a new page will appear with a proposed message that you can modify or add to. In the interest of keeping everything as simple as possible for you, they have decided to use a carousel-type approach for sending emails. When the site is accessed, there will be one message chosen randomly out of several.
Following is the latest information on this very important issue.
SCHIP Status: With the current State Children's Health Insurance Program (SCHIP) due to expire on September 30, the House and the Senate each passed bills to fund a major expansion in SCHIP before adjourning for the month of August. The Congress will re-convene in early September after Labor Day. The Senate and House versions of SCHIP are markedly different. To resolve the differences in the two measures – which will be a significant challenge - a Senate/House conference committee will be appointed. Once the differences have been resolved, the measure will be voted straight up or down by the House and the Senate, and then sent to the President – who remains adamant that he will veto any major expansion in the SCHIP program. This issue may ultimately play out into October and possibly beyond. Here is a brief summary of how cigars are treated in the Senate and House measures:
Senate SCHIP Bill – Approved by a vote of 68-31, the Senate bill taxes large cigars at a rate of 53.13% of the manufacturer's or importer's sales price, with a cap of $3 per cigar. (The tax cap was initially $10 per cigar, but thanks to the efforts of Senators Bill Nelson (Florida) and Lamar Alexander (Tennessee) that was reduced to $3. The Finance Committee refused to make any further changes because they would result in a loss of revenue.) Little cigars are taxed at the same rate as cigarettes - $1.00 per pack of 20. The new tax rates would be effective for tobacco products removed after 2007. A floor stocks tax will apply to all tobacco products, including cigars, held for sale as of January 1, 2008.
House SCHIP Bill – Passed by a vote of 235-202, the House bill taxes large cigars removed after 2007 and before October 1, 2013, at a rate of 33% of the manufacturer's or importer's sales price, with a cap of $1 per cigar. Large cigars removed on and after October 1, 2013, would be taxed at a rate of 40% of the manufacturer's or importer's sales price, keeping the a cap of $1 per cigar. Little cigars are taxed at the same rate as cigarettes -- $.84 per pack of 20. The floor stocks tax will apply to cigarettes only.
CAA Strategy: The President has proposed a $5 billion expansion in SCHIP with no tax increases. The Senate bill calls for a $35 billion expansion (funded solely by higher tobacco taxes), while the House proposes a $50 billion expansion (funded by higher tobacco taxes and controversial cuts in the Medicare Advantage Program). While the conference committee is likely to agree on a number between $35 billion and $50 billion, the final agreement will still result in a significant increase in tobacco excise taxes. And while we will do our best to bring the cigar taxes down, it will be a challenge because any further reductions will result in a loss of tax revenue. So, while we will continue these efforts, we have to also keep a post-veto scenario in mind. That is, when the President vetoes the legislation – and the Democrats will force him to do so for political reasons – and that veto is upheld, then the White House and the Congress will enter into negotiations. We do not know whether the negotiated agreement will include increased tobacco taxes or not, but if it does, those increases will likely not be as high as now proposed. However, if there is to be an increase in tobacco taxes, we want to make sure that Congress is fully informed before it makes any decisions with regard to cigar taxes. We are working with the embassies of the Dominican Republic, Honduras and Nicaragua as part of that educational process.
The International Premium Cigar and Pipe Retailers Association (IPCPR) – formerly the RTDA – has decided to retain its own lobbyists to try to exempt hand-made cigars from the SCHIP increases. We strongly believe this is not feasible politically. Frankly, the view in Washington is that cigar smokers are smoking $20 cigars which are currently paying only a nickel in federal excise taxes. Unfortunately, the decision by the IPCPR could lead to a fracture in the cigar industry's traditional united front.
What You Can Do
We need you to act now! So far, total industry efforts have resulted in the Senate reducing the large cigar tax cap from $10 a cigar to $3 a cigar, and the House reducing the large cigar tax rate from 44.63% to 33%. We need you to keep up the drumbeat of communications to Congress – focusing on the House and Senate leadership, Senate Finance Committee, House Ways and Means Committee, and your own Representative and Senators. We need our member companies, their employees, their suppliers and their employees, and consumers to be involved.
The basic message is simple: No new tax increases on cigars. The large cigar tax rate is already the highest of any product on which a federal excise tax is levied. Any further increase will only magnify this distortion.
Following are two links: One with a listing of Senators, the other of Representatives, how they voted on the SCHIP legislation, and their phone numbers.
U.S. Senate - SCHIP Roll Call Vote
U.S. House of Representatives - SCHIP Roll Call Vote
a. If your Senator or Representative voted to oppose SCHIP, begin your communication by thanking them for their vote and then ask for their continuing support.
b. If your Senator or Representative voted in favor of SCHIP and the higher tobacco taxes, urge that they reconsider their position because of the impact which any tax increase will have on you.
If the cigar industry is to achieve additional successes in this fight, it is essential that all segments of the industry and its consumers continue to treat this issue with the seriousness it deserves and act immediately. The stakes are high. Your immediate cooperation is vital. If you have any further questions, feel free to contact the CAA via their new website at www.cigarassociation.org. £
