Somewhere around here I have a package of Golden Harvest (little) filtered cigars that sell for under $15 a carton all taxes paid.
How the heck can Fred Rouse do that?
First, Fred is the eighth generation of tobacco warehousemen in Kinston North Carolina and he’s a whole bunch good, at buying and selling tobacco products, yes he surely is.
Fred’s ancestors there might have sold tobacco to the Redcoats in 1780 and the Yankees in 1865.
Fred pays $2 a pound for raw leaf and ages it in one of his warehouses until it’s good to smoke.
Fred will put a shade over three pounds per thousand cigars in his machines. At 6.10 per thousand Fred has about $1.25 worth of tobacco per carton in his cigars. Fred buys the tubes from them there Europeans ready made for maybe another $1.75 a carton.
North Carolina is no longer an Arkansas poor state. Let’s say Fred pays his help and for overhead a dollar a carton. He’s up to $4 his cost per carton.
Being a good capitalist Fred doubles his money, sells those little cigars to retailers for $8 a carton.
If they were labeled cigarretes the federal tax would be $8 plus whatever the state taxes were.
But since they are large cigars (take that tax collectors) the taxes are $4, one half the wholesale price) plus in Missouri an additional 40 cents as any other product than cigarretes. $12.40 cost to the shop.
The shop marks them up a dollar or two and out the door they go.
Fred’s cigars are tightly packed, hard to draw, and there’s a whiff of cigarish taste from the wrappers.
And they cost about twice as much than if you took Fred’s Buoy Gold, aged it six more months at home, then stuffed Fred’s imported tubes with a Chinese tax beating machine that will churn out $7.50 taxes paid cigarettes at two pounds or so per thousand all day long.