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TAMPA - 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.
Courtesy:Tampa Bay Online
The company announced the closing today.

Many employees there make Hav-A-Tampa’s iconic Jewels, inexpensive machine-made cigars known for their birchwood tips. Some workers have labored there for two decades or longer, including one who’s been there for 50 years, said Richard McKenzie, a senior vice president of human resources for Altadis USA, which owns Hav-A-Tampa.

Altadis tried to keep the plant open by closing it for a week or two at a time and furloughing workers. Eventually, though, the company couldn’t cope with a steep drop in consumer demand, brought on by the recession and a large new tax on tobacco products, McKenzie said.

Work that had been done in Tampa will now be performed in an Altadis plant in Puerto Rico, where it has extra manufacturing capacity, McKenzie said. The company is not closing its nearby distribution center off U.S. 301, where it employs about 150 people.

Employees on Tuesday were digesting how they would find work in an economy where more than one in 10 people in the area already are unemployed.

“I’ve been here 12 years. I know someone’s who’s been there 20 years, 22 years,” said Denise Harrison, an office manager at Hav-A-Tampa. “I’m sure we’ll all land on our feet, but it will be harder for some people other than me who may have done nothing else.”

Altadis USA plans to begin laying off workers immediately and will continue until closing the plant in late August. Workers will receive their pay through August, even if they are let go before that, McKenzie said. Employees also are receiving severance packages and job placement assistance.

Several things conspired to hurt Altadis’ sales, McKenzie said, including the recession and the growth of indoor smoking bans. The bans have especially hurt sales in cold-weather states, where it’s impractical to smoke a cigar outdoors in the winter, he said.

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.

Before the tax increase was passed, the cigar industry warned that consumption of cigars could fall as much as 30 percent in the year after its passage. It’s not clear yet how big of an impact the law is having on sales, Sharp said.

Harrison said she understands the company’s predicament and that Altadis has tried to treat its employees fairly, including guaranteeing employees two months of pay. Like her employer, she put part of the blame on the SCHIP tax hike.

“We can’t afford to make these cigars in the U.S. anymore,” she said.

Unlike its more upscale rivals, which favored hand-rolling and unionized labor, Hav-A-Tampa turned to machines and nonunionized labor to mass produce cigars, said Gary Mormino, a history professor at the University of South Florida-St. Petersburg. Company founder Eli Witt also was a pioneer in the use of wood tips and wrapping cigars in cellophane — practices that are now standard in the machine-made cigar industry, Mormino said.

“Hav-a-Tampa has to be one of the greatest commercial names,” Mormino said. “It just seems right.”

With the company now set to stop producing in Tampa, the last major cigar maker left in the Bay area will be J.C. Newman, which owns premium brands including Cuesta-Rey, Diamond Crown and La Unica. While those premium brands are made outside the United States, Newman still makes as many as 40,000 cigars a day in Tampa under its less-expensive brands, Rigoletto Black Jack, Factory No. 59 and Mexican Segundos, said company co-owner Bobby Newman.

When J.C. Newman moved to Tampa from Cleveland in 1954, there were 10 large cigar factories in the city.

“It’s a sad day,” Newman said. “We are the last ones left out of those.”

When I first heard about the tax increase on tobacco that will go into effect on April 1, 2009, I thought this just affected those who smoke.

When the tobacco tax increase for child health care went into effect here in Arizona on January 1, 2007, Arizona became the fourth highest state in the nation for tobacco tax. When The Children’s Health Insurance Program Reauthorization Act of 2009 goes into effect next month, smokers in Arizona and nationwide will be paying much more to smoke.(1) In Arizona as well as nationally, the new tax will increase some tobacco products by more than 2000 percent.

Although this is written from the viewpoint of someone from Arizona, taxing tobacco by so much will bring unintended consequences to Arizona and to the nation as a whole:

Smuggling Across the Mexican Border

Arizona has many problems related to drug smuggling and Phoenix is now second in kidnappings in the world.(2) When the tobacco tax goes into effect next month, this new tax will raise the actual price of a one-pound bag of tobacco from about $15 per pound to $40 per pound thus raising the actual cost for a one-pack-a-day smoker from $30 per month to $80 per month. That will make tobacco smuggling from Mexico much more profitable and the crime we have here will only increase.

The Arizona Department of Revenue website states that “cigarette and tobacco product tax evasion is accompanied by an increase in thefts, hijackings, and cross-border smuggling, counterfeit cigarettes, and black market sales”.(3a) What money is made in increased taxes from tobacco may well be paid out in increased costs for enforcement and to combat crime involved with tobacco smuggling. Arizona is already set up to recover revenues lost to tax evasion(3b) and the federal government will begin a study to determine the loss of revenue to tobacco smuggling across the border and how to recover lost revenue from cigarette smuggling from Mexico.(4)

Increased Cost in Mental Health Care

Cigarettes are often used as a way of self-medicating by people who have anxiety and/or depression. And when they quit smoking, a significant number of people who have major depression will have a new depressive episode.(5)

Major depressive disorder is the leading cause of disability in the U.S. affecting 1 in 5 families nationwide. An estimated 1 in 4 adults has a diagnosable mental disorder.(6) Yet funding for mental health in Arizona has been cut. Healthy Families (a program to help families dealing with depression and domestic violence) has been eliminated statewide.(7a) And people who have lost their jobs often lose their health insurance. As a result, our hospitals and emergency rooms and/or prisons will be the more expensive alternative. Since the closing of mental hospitals in the 60’s, jails and prisons throughout the U.S. have become our nation’s largest psychiatric facilities. (8)(9)(10)(11)

Increased Domestic Violence

Particularly during this time of economic difficulty now may not be the time to quit smoking, especially when it is not out of choice. With many people out of work and few jobs available, the result may well be increased domestic violence. According to some sources there already is an increase in domestic violence due to the economy.(12) Add to that people being forced to quit because they cannot afford it and this is a recipe for disaster. And yet, a few months ago the Maricopa County Tobacco Prevention Program stopped offering stop-smoking classes. And the mental health funding of Healthy Futures here in Arizona has been drastically cut.(7b) Further, when people lose their jobs and also lose their health insurance, counseling may be financially out of the question.

Otherwise Law Abiding Citizens Could Become Criminals

People who smoke and who now cannot afford it will try to find ways to continue smoking. It may be as simple as crossing a state border, ordering tobacco products from another country such as Canada or even buying cigarettes on the black market.

According to the Arizona Department of Revenue “under Arizona Revised Statutes 42-1127 any person who evades the reporting, assessment or payment of cigarette or tobacco product taxes that would otherwise be due may be guilty of cigarette or tobacco tax evasion. Violators are subject to fines and/or jail time”.(3C) As a result, normally law-abiding people who are not criminals may unintentionally become criminals. Yes, ignorance of the law is no excuse; however, these laws have not been well publicized. And although it is doubtful that anyone would go to prison for avoiding the tax, some teenagers may be the unwitting buyers who could end up with a conviction on their record for the rest of their lives.

This may sound far-fetched; however the result of excessive tobacco tax may be that “law-abiding citizens learn to break the law routinely, and states respond by adopting intrusive and sometimes abusive tactics to catch them”.(13)

The United States already spends $200 billion dollars per year to keep people in prison. (14b) Approximately half of those incarcerated are non-violent offenders.(15) Today 1 in 100 adults in The United States is incarcerated(16) and as many as 31 in 100 are currently either in jail or on probation.(17) As a society we do not need to increase the number of people in jail because of non-violent offenses. And we do not need to add more to our already overburdened courts. We simply can’t afford it.

Prohibition Doesn’t Work

With the taxes on tobacco being raised so high - in essence, this amounts to prohibition - particularly for the poor and those on a limited budget. We learned (or should have learned) when alcohol was prohibited in the U.S. that morality and/or personal choices cannot be legislated. Experience has shown that prohibition didn’t keep many from using alcohol, but only created criminals out of those who continued to use the substance. Bathtub gin not only was illegal, but made many sick. And Prohibition created an opportunity for anyone who found that selling illegal alcohol paid off.

“Violence was common in the alcohol industry when it was banned during Prohibition, but not before or after. Violence is the norm in illicit gambling markets but not in legal ones. Violence is routine when prostitution is banned but not when it’s permitted. Violence results from policies that create black markets, not from the characteristics of the good or activity in question.” (18a) As shown during Prohibition, the cost to society as a whole was immense.

The Tobacco Tax Will Not Sustain SCHIP

Although the proponents of the tobacco tax say this tax on tobacco products is a stable source of income, according to the Heritage Foundation, 22.4 million new smokers will be needed by 2017 in order to produce the revenues that Congress needs to fund SCHIP. (19)

The tobacco manufacturers have increased the addictive substances in tobacco over the years. Menthol cigarettes have been found to be most addictive - yet those are marketed towards teens. (20) However, with the new tax, quite a few people will not be able to afford to continue to smoke and will quit. Thus the way to get 22.4 million new smokers very possibly could be through more aggressive advertising towards teens.

Few people get through life without making some choices that affect their well being or cost society in one way or another - whether it be eating or drinking too much, driving too fast, not exercising or being financially irresponsible. But when any minority population is taxed excessively, the consequences to Arizona and to our nation may be much more than what was intended.

1. Alcohol &Tobacco Tax & Trade Bureau http://www.ttb.gov/main_pages/schip-summary.shtml

2. Brian Ross, Richard Esposito and Asa Eslocker, “Kidnapping Capital of the U.S. A”, Feb 11, 2009, ABC News abcnews.go.com/Blotter/story?id=6848672&page=1.

3. Arizona Department of Revenue www.azdor.gov/criminalinvestigations/Tobaccomenu.htm

4. Children’s Health Insurance Program Reauthorization Act of 2009, Section 703 www.govtrack.us/congress/billtext.xpd?bill=h111-2

5. Arizona Smoker’s Helpline “Ashline Quit Facts”
www.ashline.org/downloads/factSheets/depression_000.pdf

6. National Institute on Mental Health www.namiwnc.org/facts.html

7. Michelle Reese “DES Cuts Mean Children’s Services Slashed” Feb. 21, 2009 East Valley Tribune
www.eastvalleytribune.com/story/135783

8. Adam Liptak “1 in 100 U.S. Adults Behind Bars, New Study Says” Feb. 29, 2008, New York Times
www.nytimes.com/2008/02/28/us/28cnd-prison.html?_r=1

9. Bernard E. Harcourt “Mentally Ill Behind Bars Jan. 15, 2007 University of Chicago Law School
http://www.law.uchicago.edu/news/harcourt-mentally-ill-prisoners/index.html

10. Joanne Mariner.. “Prisons as Mental Institutions” Oct. 27, 2003
http://writ.news.findlaw.com/mariner/20031027.html

11. Mindy Herman-Stahl, Marni L. Kan, and Tasseli McKay, “Incarceration and the Family: A Review of Research and Promising Approaches for Servicing Fathers and Families”, Sept. 2, 2008
aspe.hhs.gov/hsp/08/MFS-IP/Incarceration&Family/ch2.shtml

12. Sally Kalson, “As economy falters, rise seen in domestic violence” Nov. 2, 2008. Pittsburg Post Gazette
www.post-gazette.com/pg/08307/924499-51.stm

13. Richard E. Wagner, Ph.D., “State Excise Taxation: Horse-and-Buggy Taxes In an Electronic Age” The Tax Foundation
http://www.taxfoundation.org/publications/show/522.html

14. “Facts About Prison System in the United States”, October 2007
webb.senate.gov/pdf/prisonstwopager.html

“Mass Incarceration in the United States: At What Cost?”, October 4, 2007, U.S. Joint Economic Committee Hearings, Washington, DC
http://jec.senate.gov/index.cfm?FuseAction=Hearings.HearingsCalendar&ContentRecord_id=7a22e2ab-7e9c-9af9-7bb7-4a1b88554f61&Region_id=&Issue_id=
15. Bureau of Justice Statistics Criminal Offender Statics www.ojp.usdoj.gov/bjs/crimoff.htm

16. Adam Liptak “1 in 10 U.S. Adults Behind Bars, New Study Says” Feb. 29, 2008 New York Times
www.nytimes.com/2008/02/28/us/28cnd-prison.html

17. “One in 31 U.S. Adults are Behind Bars, on Parole or Probation” The Pew Charitable Trust
http://www.pewtrusts.org/news_room_detail.aspx?id=49696

18. Jeffrey A. Miron, CNN Editor’s note: Mar 24, 2009
www.cnn.com/2009/POLITICS/03/24/miron.legalization.drugs/index.html

19. Michelle C. Bucci, William W. Beach “22 Million New Smokers Needed: Funding SCHIP Expansion with a Tobacco Tax” July 7, 2007 Heritage Foundation
www.heritage.org/research/healthcare/wm1548.cfm

20. Kreslake JM, Ferris Wayne G, Alpert HR, Koh HK, Connolly GN. “Tobacco industry control of menthol in cigarettes and targeting of youth and young adults”, American Journal of Public Health, 2008; 8(9):1685-92

Courtesy: www.Headsupusa.com

(CNN) — Larry Jukes said he remembers when he could buy 10 cigarette packs for $2.50.

Coloradan Larry Jukes says he’s upset about the hike but doesn’t expect it will persuade him to quit smoking.

But he’d now take the days when — just last month — he could buy his carton of choice for $49.

Thanks in part to the largest-ever federal cigarette tax increase — a nearly 62-cents-a-pack hike that starts Wednesday but was reflected in many prices earlier — Jukes on Tuesday paid more than $58 for a 10-pack carton at the Cigarette Store in Denver, Colorado.

That same store was selling it about $9 cheaper weeks ago. Jukes and other shoppers there said they feel stuck and taken advantage of.

“They’re picking on us poor people, the ones that smoke,” Jukes, a 65-year-old who has been smoking since he was a teen, said of the government. “They have been for years.” Watch Jukes argue smokers are unfairly targeted »

The cigarette excise tax that tobacco companies must pay the federal government rose Wednesday by 61.6 cents per pack, or $6.16 per carton. The tax now comes to about $10.10 per carton, or $1.01 per pack.

But major tobacco companies began incorporating that increase into their prices to wholesalers in March. And the companies, wholesalers and retailers in many cases gave prices a boost beyond the tax increase, in part to make up for an expected drop in sales caused by the hike, some of them said.

“We don’t anticipate another raise for Wednesday. The [March increase in prices] was the raise,” said Mary Szarmach, vice president at Colorado-based Cigarette Store Corp., which operates 85 stores in five states. “The manufacturers took what they needed beyond [the tax increase] to maintain their profit margin and take care of what they think will be diminishing sales. …

“And to maintain gross profit margin, retailers in general tacked on a little, too.” Watch how and why the tax hike was instituted »

If the increase does scare off customers, 83-year-old Gloria Egger isn’t likely to be one of them, she said. She said she’s upset at the government for raising the tax, but Egger, who has been smoking since she was 18, isn’t likely to quit. iReport.com: Share your thoughts on the tobacco tax increase

“I think it’s ridiculous. … They’re picking on smokers,” Egger said at the Denver store, where she bought two cartons Tuesday. “I think they’re trying to run the tobacco companies out of business.

“As old as I am, I’m not going to quit smoking, regardless of what they do.” See other reactions to the tax hike »

Federal taxes also are going up Wednesday on other tobacco products, including cigars. Federal per-cigar taxes, which vary based on weight and price, used to be capped at 4.9 cents but now are capped at 40.26 cents.

The tobacco tax hikes, which President Obama signed into law in February, will be used to finance an expansion of the State Children’s Health Insurance Program, or SCHIP. The expansion, which will cost $35 million over five years, is expected to secure federally funded health care for an additional 4 million children.

Before the expansion, SCHIP covered almost 7 million children whose parents earn too much to qualify for Medicaid — the federal health insurance program for the poor — but can’t afford private insurance.

Dave Bowersox, who bought a box of Prime Time Little Cigars at the Denver store Tuesday, said he’s fine with the tobacco tax increases.

“I think tobacco, alcohol, that kind of stuff should be taxed instead of gasoline and food — things that are necessary for people to survive,” Bowersox said.

But near Orlando, Florida, cigar smoker Leah Fuller called the hikes “ridiculous.”

“There are [other] things that you could be targeting in the U.S. right now. Why the tobacco industry?” Fuller said. “I, personally, smoke cigars to relax. Why am I being punished for it?”

Jeff Borysiewicz, founder of Orlando-based Corona Cigar Co., said he believed the federal tax hike will cause cigar sales to drop. And he said the increase comes as Florida is considering a $1-per-cigar state tax hike. iReporters debate whether the change in price is fair »

Cigarettes, too, have been hit by state excise tax increases. Since January 2002, the average state cigarette tax has increased from 43 cents per pack to $1.21 per pack, according to the Campaign for Tobacco-Free Kids.

A conservative estimate for the average per-pack cigarette price in the U.S., based on data collected from states and territories at the end of 2008 and adjusted for the federal tax increase, is $4.80, the group’s Eric Lindblom said.

Tobacco company Philip Morris USA raised list prices for its major brands by about 71 cents per pack last month “in direct response to the tax increase,” said Bill Phelps, spokesman for Philip Morris’ parent company, Altria.

RJ Reynolds Tobacco Co. on March 16 raised its cigarettes’ list prices by 41 to 44 cents per pack and, in many cases, reduced discounts to retailers, basically keeping “our pricing in line with the competition,” spokesman David Howard said.

“The federal tax increase was the primary driver,” Howard said.

Both companies said they expect a decrease in sales, with Howard noting industry analysts have estimated a drop of 6 percent to 8 percent. One factor in Philip Morris’ decision to increase list prices beyond the tax hike was the company’s expectation that the new tax level will decrease sales, Phelps said.

Not all U.S. sales declines would be due to smokers quitting, Phelps said.

“Tax increases create an incentive for people to bring cigarettes into the country illegally — [from places] where they don’t have to pay that higher tax,” Phelps said.

Nick Hamad, a tobacco store owner in Seattle, Washington, said he thinks the tax will ruin the American tobacco industry.

“If we lose the sales, the state will lose the revenue,” he said. “We will be hurt, the state will be hurt and eventually the consumers are being hurt.”

As for Jukes, higher prices probably won’t force him to quit smoking, he said.

“I’ve been smoking about 50 years,” Jukes said.

Courtesy: http://www.cnn.com