Cigar Association of America, Inc.

The national trade organization of cigar manufacturers, importers and distributors as well as major suppliers to the industry.
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Durbin Plan Impact, From Drastic to Dire

Durbin Plan Impact, From Drastic to Dire
Craig Williamson, President, Cigar Association of America

With all the cliffs, showdowns and budgetary infighting in Washington, one so-called “special interest” is targeted above others to be on the losing end – cigar smokers and the businesses and employees involved in the manufacture and sale of cigars and pipe tobacco.

The Cigar Association of America has been involved with legislative and regulatory issues across the nation for more than three-quarters of a century, but the situation in Washington this year calls for special attention.

Are we crying wolf? How about legislation that calls for a 100 percent tax on many cigars (including premium cigars). On top of that, a staggering 870 percent tax increase on pipe tobacco, effectively shutting down the industry and throwing thousands of distributors, wholesalers, retailers, and related concerns out of business, and leaving thousands of their employees jobless.  

It’s called the Durbin Bill, the Tobacco Tax Equity Act of 2013, recently introduced in Congress as Senate Bill 194. Introduced by Illinois Sen. Richard Durbin (D), the proposal would amend the Internal Revenue Service Code to tax pipe tobacco, smokeless tobacco products, and large cigars at the same level as cigarettes. In 2009, Congress raised taxes on small cigars and loose tobacco for rolling, along with cigarettes. The Durbin Bill would impose taxes on items not covered in the 2009 law.

Why the draconian measures? Simply put: to raise revenues.  In the current federal fiscal morass, members of Congress are constantly on the lookout for financial sources to save these favored programs. And with deficit-cutting measures on everyone’s agenda, no revenue-raising scheme is off the table. Unhappily for its producers, retailers, and consumers, the tobacco industry is a perennially popular target for members of Congress to exploit for financial gain. 

According to the Joint Committee on Taxation, new taxes on tobacco would generate roughly $3.6 billion for government coffers in the next 10 years, including $1 billion alone from new taxes on premium cigars. 

In addition to its revenue-raising appeal, proponents of the Durbin Bill are seeking to force the regulation of cigars by the Food and Drug Administration (FDA), in the same manner that cigarettes are regulated.  FDA intervention would require cigar makers to disclose their ingredients, subject their products to onerous, time-consuming testing, and impose restrictions on the marketing and advertising of their products—even affecting the time-honored artistry of cigar box decoration. The imposition of FDA regulation on the cigar industry would severely hamper cigar makers’ development of new blends and would, in theory, ban events where cigar makers offer samples. 

The unacknowledged intention of the proposed increase in taxation and regulation is to put the cigar industry out of business—for good. 

That’s a point the cigar industry and cigar lovers need to make together to Congress. This legislation drastically restricts and reduces the choices adults have to smoke cigars and pipes. For the industry – for growers, manufacturers, retailers and associated businesses – it’s beyond drastic. Skyrocketing taxes and regulations will have a dire effect on employees and their families who will see an entire industry diminish and in some cases disappear and their jobs eliminated.

There’s no question that in the current fiscal and political climate, the cigar industry is vulnerable. The coming weeks are critical as Congress and the White House will inevitably be forced to come to the table to decide a mix of budget measures and taxes to fund the government. As president of the Cigar Association of America, one of my key long-term concerns is the possibility of a 1986-style tax system overhaul, which could have drastic and devastating consequences for the cigar industry. 

As the national trade organization of cigar manufacturers, importers and distributors as well as major suppliers to the industry, CAA is staying vigilant. Formed in 1937, we’re working in all 50 states and Washington, DC to influence, track and report on legislation affecting the cigar industry on behalf of our members and their customers.

CAA and its representatives strive to help effect legislation that allows its members to conduct their business in a fair, reasonable, and responsible manner that serves the best interests of their companies and their customers.  At the same time, we’re working to defeat legislation, such as the Durbin Bill, that places unfair tax and regulatory burdens on the cigar industry, leads to job losses, and infringes on the rights of adults to smoke cigars. 

To keep current on political and legislative activity in Washington and state capitals across the nation, check out our website at www.cigarassociation.org.