Cigar-makers in huff over new tax
MIAMI - Inside the rolling room of El Credito Cigar Co., the air is earthy and fragrant, a mix of coffee and nuts tinged with caramel and leather.
Amid those sweet smells, though, workers are worried about a new federal tobacco tax that threatens Florida's $2 billion cigar industry. The tax has increased from 5 cents to about 40 cents on large cigars, a little less on smaller stogies. Cigar-makers say the increase will torch jobs and profits - what's left of them in the recession.
Like dozens of cigar companies dotting Miami's Little Havana neighborhood, El Credito uses traditional rollers - or, in Spanish, "torcedors" - to hand-make La Gloria Cubana, the company's most famous and expensive cigar. The workers sit at wooden tables and fold tanned tobacco leaves, cut them with a crescent-shaped knife and then roll the wads into fat Churchills, Coronas and Torpedoes.
"Many of our rollers are worried," said Hector Ventura, operations manager for El Credito. "They think that if we have less sales, they will lose their jobs. We know for sure the tax increase will reduce our sales. It's not good for our business, not good at all."
The revenue from the new tax will help pay for a health insurance program for low-income children that President Obama signed into law about two months ago. The State Children's Health Insurance Program, or SCHIP, will extend coverage to 11 million kids.
Florida has long been the hub of U.S. cigar making. In the 1890s, much of the nation's cigars were rolled in Tampa by Cuban immigrants.
Eric Newman, the co-owner of the J.C. Newman Cigar company in Tampa, said these are the toughest times in the company's 114-year history.
"The last thing we needed was the government to throw this roadblock at us," Newman said. "This could push our industry off a cliff."
Newman said his company will go from paying $1 million in taxes a year to $4 million.
Cigarette smokers are angry they will have to pay 62 cents more per pack, but cigar-makers and importers say their industry will suffer disproportionally, especially in Florida where 75 percent of the nation's cigar-makers and importers are located.
"This is part of the culture of Miami and of Florida," said Enrique "Kiki" Berger, who co-owns Cuban Crafters Cigars in Miami.
Berger imports a chunk of his cigars from Nicaragua. He said he will pay hundreds of thousands of dollars more on each imported shipment - and that cost will be passed along to retailers and customers. The price of a pack of 25 cigars - $29.99 - will go up about $10 after the tax, he said. A single large cigar will increase by about 40 cents; Cuban Crafters sells them from $1 to $15 each.
Thursday, April 23, 2009