Just about every member of the pipe smoking community should already know about H.R. 4439, the Tobacco Tax Parity Act of 2010. It proposes to raise the tax on pipe tobacco 775% from $2.8311 to $24.78 per pound. Many of you have signed our Petition to Stop the Pipe Tobacco Tax. While I am quite pleased with the support the pipe community has shown in rallying against this bill, many of the comments, attitudes and opinions expressed have been disappointing and disheartening to say the least.
We are thankful for the support, but we are frustrated with the finger-pointing, self-segregation of smokers and suggestions to tax other things that are Personal Lifestyle Choices.
Those of us that enjoy pipe smoking are not happy about more and more taxes being placed on pipe tobacco. We also don’t like all the new smoking restrictions that keep popping up, especially the ludicrous restrictions against outdoor smoking and no smoking inside a tobacconist’s shop. Yes, there are some localities that have passed and proposed laws outlawing smoking indoors, including tobacco shops and smoking lounges.
Most people that don’t smoke a pipe probably couldn’t care less, but they should.
On a rare occasion we might find a non-smoker that actually believes in smoker’s rights and has a general "live-and-let-live" attitude. It amazes me how many pipe smokers do not have this philosophy. You want pipe smoking to be left alone, but you don’t mind pointing the finger to someone else’s personal choices.
Many of the comments placed on our petition gave the message to not tax pipe tobacco, but instead to tax other things like snack foods, soda, and alcohol … or other forms of tobacco, like manufactured cigarettes or roll-your-own (RYO) tobacco.
Do you like donuts, sugared cereals, or sugared colas? How about Twinkies? Do you sometimes enjoy French fries, Hamburgers, or Hot dogs? Did you eat any of this stuff on Super Bowl Sunday perhaps?
How about steak? Raise your hand if you like Steak! What about Pizza?
What about Video Games? Anyone here own an XBox or PS2? Shouldn’t you be outside exercising instead of sitting on the couch playing a game?
Well, you know what? It’s none of my Goddamn business and it’s nobody else’s either.
It’s nobody’s business what any of our Personal Lifestyle Choices are.
This is not meant to be a political website, but I am of the strong opinion that government should not try to regulate anything that is someone’s personal lifestyle choice. It doesn’t matter if someone says it’s bad for you. Lots of people say that pipe smoking is bad for you. Are you going to quit because of this? Do you think it is fair to have it taxed out of existence?
There are even some people in the pipe community and pipe tobacco business that minimalized the situation by stating that this is not a big deal in real dollars and cents.
Hey people, it doesn’t matter if you are a multi-millionaire, have your own private jet, and eat $100 lunches every day, and it doesn’t matter if "it’s less than 25¢ a bowl". This is how percentages come in handy – it’s a 775% increase! It’s the principle of the thing, but it IS also about the money. How many bowls do all of us smoke? How many pounds of pipe tobacco are produced in the US?
According to Norman Sharp, president of the Cigar Association of America. Pipe Tobacco Sales were 5.3 million pounds in 2008.
$2.8311 x 5.3 million pounds of pipe tobacco = $15 million+ in taxes ($15,004,830 to be exact).
$24.78 x 5.3 million pounds of pipe tobacco = $131 million+ in taxes ($131,334,000 to be exact).
That’s an increase of $116,329,170. If you got a check for 1% of that, you would get over $1.1 million dollars. I’ll take that any day over 25¢ a bowl.
The Roll-Your-Own (RYO) Industry is NOT the Bad Guy
Many of you already know how this started.
Obama and Congress increased taxes on tobacco products earlier this year to pay for expanded children’s health insurance (S-CHIP), but tobacco for roll-your-own cigarettes saw a disproportionate leap, from $1.10 to $24.78 a pound. Some predicted the tax would kill the roll-your-own industry, which had offered a cheaper alternative to packaged cigarettes.
But tobacco companies quickly adapted. According to The Associated Press; as the tax was on the books, companies all but shut down their roll-your-own brands and reinvented them under a less-restricted, less-taxed category: pipe tobacco. It’s still destined to be rolled and smoked, but it’s taxed at barely a tenth the rate, $2.83 a pound. Here is the chart from the "TTB", the Alcohol and Tobacco Tax and Trade Bureau that shows the increases on tobacco taxes from S-CHIP. Notice that pipe tobacco already had a tax increase from $1.0969 per pound to $2.8311 per pound.
Tax Rate effective March 31, 2009
Tax Rate effective
Floor Stocks Tax Rate
|Small Cigarettes – Class A
(Weigh 3 lbs. or less per 1,000)
|$19.50 per 1,000
$3.90 per carton
$0.39 per pack
|$50.33 per 1,000
$10.066 per carton
$1.0066 per pack
|$30.83 per 1,000
$6.166 per carton $0.6166 per pack
|Large Cigarettes – Class B*
(Weigh more than 3 lbs.
|$40.95 per 1,000
|$105.69 per 1,000
|$64.74 per 1,000
(Weigh 3 lbs. or less per 1,000)
|$1.828 per 1,000
|$50.33 per 1,000
|$48.502 per 1,000
(Weigh more than 3 lbs. per 1,000)
|20.719% of sales price but not to exceed $48.75 per 1,000
|52.75% of sales price but not to exceed $0.4026 per cigar (or $402.60 per 1,000)
|NOT PART OF FLOOR STOCKS TAX
|$0.195 per pound
|$0.5033 per pound
|$0.3083 per pound
|$0.585 per pound
|$1.51 per pound
|$0.925 per pound
|$1.0969 per pound
|$2.8311 per pound
|$1.7342 per pound
|$1.0969 per pound
|$24.78 per pound
|$23.6831 per pound
|$0.0122 per 50
|$0.0315 per 50
|$0.0193 per 50
|$0.0244 per 50
|$0.0630 per 50
|$0.0386 per 50
In the TTB’s publication, "Tobacco Product Tax Classification", you can learn how different types of tobaccos are classified for tax purposes. Interestingly, on page 13, you can see that they only way they differentiate pipe tobacco from roll-your-own is by packaging and labeling, but it also does reference how the tobacco is going to be used. (Download Tobacco Product Tax Classification PDF)
The Associated Press was almost right.
The truth is that RYO companies saw this coming for a long time. S-CHIP was debated for about a year before it became law. Most, if not all of the RYO companies made the transition to pipe tobacco long before the law went into effect. The Associated Press had the timing wrong. The RYO guys didn’t wait for the law to go into effect. They started making the change about 9 – 10 months prior.
If you want to blame the RYO industry and make them the bad guys, I ask you to rethink your opinion. As a businessman myself, I do not blame the RYO companies at all. I would have done exactly the same thing. Anyone that is a business owner should agree. Heck, even if you have a "regular job" and are an employee, think of the employees at the RYO companies in danger of losing their jobs.
Those of you that would demonize and point the finger at RYO may not know that many of you might also consider one of the RYO business owners as a "pipe tobacco hero".
In one of our most popular articles, The Mystique of Perique, you learned how one man almost single-handedly saved our beloved Perique tobacco from nearly becoming extinct.
Mark Ryan, the owner of L.A. Poche Perique Tobacco company also owns Daughters & Ryan, which formerly produced RYO and then switched to pipe tobacco. They made the switch long before the tax rate changed.
To me, Mark Ryan is still a hero, not only for saving Perique tobacco, but for also having the cojones to be a true entrepreneur. He has the tremendous strength, willpower and energy to run two companies in an industry that is constantly under fire from some very big guns.
His company is not huge. He is not "big tobacco" with billion-dollar deep pockets, but the man works his butt off to make a living for himself and others, and to bring many people their tobaccos of choice. He employs 14 people directly, and through relationships with suppliers, vendors and customers, his businesses touch tens of thousands of people.
I spoke to Mark about this situation. He had this to say:
Mark Ryan: I just don’t think any of this stuff is by accident anymore. The anti-tobacco radicals have gone after roll-your-own, and it was obvious to go after pipe tobacco next. It’s just a matter of where and when does it end? If you listen to these people now, it’s no longer a health policy, it’s elimination of tobacco product manufacturers. If you think there’s anything else behind this agenda, I’m afraid it’s wishful thinking. I don’t know if a new administration will help us or not.
Look at what’s coming with the FDA. It’s a radical agenda, and it’s about control. We’ve gone from 55% of us using tobacco products in the ’50s to maybe 25% in 2000, and maybe 18% of us now. To these radicals, that’s not enough and it’s not fast enough because it’s all about control. If they get it down to 10%, that’s not enough because they want that 1 in 10 people to stop. Period. It’s all about control. And it’s all about manipulation of human behavior in our society right now. Radicals want us all gone.
PipesMagazine.com: What do you say to the pipe smokers that are blaming the roll-your-own companies, saying they brought this possible tax increase on us pipe smokers?
Ryan: There’s two answers to that. One is that’s it’s just like I said before. It’s kind of naive to think now that these radical prohibitionists are going to settle for roll-your-own. They’re going after every tobacco category to eliminate it all. Pipe tobacco is just another one in succession and they want to cut that way back through taxation. That’s an inevitability from the momentum of this radical prohibitionist agenda. I know that sounds crazy for me to say that, and I’m not one of these people that’s into conspiracy stuff… It’s been 10 years in it’s incremental-ism – it’s hard to see how were going to go back and recapture our rights and freedoms.
With regard to blaming roll-your-own, what are you going to do? When the government is oppressive and passes an increase of over 2,000%, as a human being, what do you want people to do? The roll-your-own companies, have the $25 tax, the MSA, the tobacco farmer buyout – you’re talking $31 in taxes (per pound). This is what people have to realize. They can talk about Socialism all they want. With Socialism, maybe the government steals half of what you earn. I was faced with a proposition of working like a slave to earn a dollar, and give the government $31!
For a human being, that’s a hard pill to swallow. That’s when productive people in our society start to think that maybe it’s time to withdraw from the economy. So they can jump on roll-your-own all they want. What do you do? Do you protect yourself? Do you protect your family? Do you protect your employees? Or do you protect a bunch of deadbeats in government that are trying to steal everything you make? When does it end? What does it come down to? You can throw the blame game, but they’re going to go categorically through all eight groups of tobacco that are regulated by the TTB. It’s sequential, and the writing’s on the wall.
Unless we stop these people, and I don’t know how, we’re in trouble. We’re going to lose our right to smoke.
PipesMagazine.com: Right now there is no clear definition between roll-your-own and pipe tobacco, except for how it’s labeled. Do you think that’s going to change?
Ryan: I don’t think that will be changing. The pressure on the TTB to make the immediate change is not there anymore since they are trying to just make the tax the same on both. It’s going to be a big problem down the road though because the states are going to complain that the pipe guys aren’t paying into the MSA.
[Editor’s note: The MSA is the Master Settlement Agreement in the cigarette industry, whereby tobacco companies agreed to forever pay annual payments to the states to compensate them for some of the medical costs of caring for persons with smoking-related illnesses so 46 attorney generals would drop their class-action lawsuit. More info on MSA on Wikipedia.]
So what’s the next step? These oppressive bastards are going to make everybody in pipe tobacco register in their states. Folks in roll-your-own and cigarettes do now. Every year you have to get your brand certified. In terms of incrementalism, that’s one of the next steps, and another thing to destroy manufacturers because the paperwork is so regressive and so time-consuming, it’s more than a small company can sustain.
The people in government can do it because they don’t have to pay for their payroll. They can just steal more money from taxpayers. They can add employees ad nauseam to process all the paperwork because they don’t have to produce anything to pay all the salaries. For a business it’s a little different. It gets to a point that a business just says screw it, I can’t afford the paperwork. It’s time to shutter the store. We’re getting to that point.
The tobacco situation is a model for the other industries that these radical prohibitionists type people are going to attack. Is it going to be the sugar-sodas? Is it going to be fat or bacon? Or some other food? Who knows. This is a very effective model for these people that are totally into controlling our behavior. Once they get healthcare, what do you think is next? Don’t you think they’re going to tell you not to smoke and what to eat? We’re in big trouble if that healthcare thing goes through. They’ll be telling us how to live.
Taxation to Control or Manipulate Behavior is Wrong
Taxation to control or manipulate behavior is wrong and there is no argument that makes it right, whether it is tobacco or anything else. Just because something is supposedly "bad for you", or someone else doesn’t like it, doesn’t mean nobody else should be allowed to partake of it.
In the beginning of this article I referenced many of the comments that I thought were wrong because they suggested taxing other things besides tobacco.
However, there were some people that commented that do not smoke, and they said this new pipe tobacco tax goes too far. They recognize that the encroachment on tobacco consumers rights will eventually lead to other products that they might enjoy.
I’d like to end this with a comment from Larry M. of Saint Charles, MO:
"Please don’t put an end to our business. It is our 93rd year, third generation selling pipes, tobacco and cigars. The Constitution of the United States of America guarantees us life, liberty and the pursuit of happiness."