Taxes Fail To Stimulate Growth
Hard to believe that higher taxes and more government intervention would actually hurt business, but Florida-based Hav-a-Tampa cigars, a subsidiary of Altadis USA, has been forced to close and lay off 500 employees:
Several things conspired to hurt Altadis' sales, [Altadis VP Richard] 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.
[Hav-a-Tampa office manager Denise] 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.
At the rate government economic destruction is growing, we can't afford to make anything in the U.S. anymore.
Comments (34)
Taylor
Skip,
This story reveals a new aspect to the "trade war" that's developed between the world's nations in the wake of this economic crisis-- looks like the US federal government is a turncoat traitor against its own citizens! The taxes work as an effective tariff on domestically-produced cigars, forcing the companies out and overseas... brilliant! Who ever heard of a country that erected trade barriers to its own citizens' production?
As Lysander Spooner said, to turn against this government would be No Treason.
Published: June 24, 2009 3:08 PM
Joel Parkes
It's nice to know that people on this website care more about smoking than the health of small children.
Published: June 24, 2009 4:10 PM
Vitor
Well, they had the intention of hurting a cigarette company, the whole cigarette industry is being destroyed.
Published: June 24, 2009 4:15 PM
BioTube
And what's going to fund SCHIP if the cigar/cigarette industry ceases to exist?
Published: June 24, 2009 4:31 PM
Bogart
Don't worry about the tobacco industry, unless you are a farmer or other worker in the US. I am sure that we will be loading up prisons with tobacco smugglers soon if not already.
You see that the more the US makes things illegal the more they spend on incarcerating the users while letting the true murderous smugglers reign free.
Published: June 24, 2009 4:38 PM
Mark Ennis
To the sanctimonious person above who mentioned caring about smokers more than the health of children, do you think the health of children it at all impacted by their parents no longer having jobs and health insurance from their former employer? Or is it ok to screw the kids of companies who make cigars in order to save the rest from cigar smoke?
Published: June 24, 2009 4:44 PM
Vlad Popovic
This is economic warfare, and it is following a predictable pattern: tax "red states" and subsidize "blue states". The tobacco tax is small potatoes, just a little humiliation. The carbon tax will be the coup de grace: it will punish all productive pursuits (concentrated in the southern and plains states) and use the proceeds to reward the unproductive ones in reliable democrat districts like Manhattan and Detroit.
And I thought Dubya was bad! I'm almost starting to miss him. Almost.
Published: June 24, 2009 4:57 PM
Inquisitor
"It's nice to know that people on this website care more about smoking than the health of small children. "
Aww think about the wittle childwen! Insidious wretch. How vile of you to exploit them to make your case against markets...
Published: June 24, 2009 5:41 PM
Russ
Inquisitor wrote:
Aww think about the wittle childwen! Insidious wretch. How vile of you to exploit them to make your case against markets..."
I agree. How far is it from "protecting the children" from tobacco, to "protecting them" from their parents!? After all, if all children were taken by the State, they could assure that the children are only taught the politically correct things.
Published: June 24, 2009 6:23 PM
Shay
Why another expendable industry, of course (at least until it folds under the tax burden as well). As for thinking of the children, I agree; we should just run all businesses into the ground for their sake. I'm sure they'll thank us later, at least the ones that survive long enough in the ruins that remain.
Published: June 24, 2009 6:28 PM
2nd Amendment
Joel Parkes,
As a libertarian who thinks that taxes should not exist, who thinks that people ought to keep 100% of their paycheck and that there should be no property taxes etc.
I must say that I agree with you. Tobacco products are the bane of civilization because those libertarian individuals who smoke tobacco then go on and spread their smoke around.
I recognize that the cigar belongs to the cigar owner and that the health of the smoker is his own business. He has the absolute right to destroy his own health and enjoy his cigar with his own smoke.
Where I have a problem is that after having inhaled his smoke, the cigar smoker then goes on and spread this smoke around.
This in my mind violates the libertarian non-aggression and non-initiation of force principle.
By spreading your second-hand smoke around, you are effectively FORCING children and non-smokers to inhale your deadly smoke.
Therefore I perfectly agree that tobacco should be taxed and regulated.
If tobacco smokers want to have the right to smoke anytime and anywhere and if they don't want to pay taxes, then they should leave their smoke in their lungs and stop exhaling their smoke around.
The solution would be to invent a clean burning tobacco that doesn't spread toxic chemicals around.
Published: June 24, 2009 6:30 PM
Russ
2nd wrote:
"The solution would be to invent a clean burning tobacco that doesn't spread toxic chemicals around."
No, the solution is to apply libertarian principles consistently. If a person is "spreading his smoke around" in a privately owned establishment where the owner allows this (such as a cigar and martini bar), he is doing absolutely nothing wrong. Only if it is in a publicly owned establishment do you have a case here.
Published: June 24, 2009 7:46 PM
BioTube
Besides, they have come up with nicotine vaporizers - look up "e-cigarette".
Published: June 24, 2009 9:54 PM
Walt D.
Blame the tobacco executives. When Waxman the Taxman asked them to swear before congress that tobacco was non-addictive, they, instead should have sworn that tobacco taxes are addictive!
Published: June 24, 2009 10:08 PM
Zach Bush
2nd Amendment,
How do you come to the conclusion that tobacco users should pay taxes to offset the harm caused by second-hand smoke?
How is the person that is harmed by the second-hand smoke compensated when the user pays a tax to the government?
Libertarian theory, properly applied, would suggest that if a court determines the person was indeed harmed then they would be compensated directly.
Also I would like to understand your definition of 'force'. Unless you are being held hostage in a room with someone blowing smoke in your face, you are clearly not being forced to inhale it. You always have the option to A) politely ask the person to stop smoking or B) walk away.
Published: June 24, 2009 10:08 PM
Zap
"By spreading your second-hand smoke around, you are effectively FORCING children and non-smokers to inhale your deadly smoke."
So hold your breath.......and die
Published: June 24, 2009 11:05 PM
Gil
" Only if it is in a publicly owned establishment do you have a case here."
Which would exist in Libertopia . . .
Published: June 24, 2009 11:27 PM
P.M.Lawrence
Actually, in very special circumstances which do not apply in our time and place, taxes do stimulate growth, e.g. in colonial Madagascar. However, it's pretty clear that that is only "growth" of the cash economy, not counting people's preferred activities outside that. More generally, the sort of modelling that shows that deficit spending gives a stimulus also shows that you get a stimulus by increasing both taxes and spending without a deficit, although with smaller multipliers. This is probably correct in the same narrow sense, from not counting the preferred activities that get squeezed out.
Published: June 24, 2009 11:37 PM
Alex Mullins
"As a libertarian who thinks that taxes should not exist, who thinks that people ought to keep 100% of their paycheck and that there should be no property taxes etc."
"Therefore I perfectly agree that tobacco should be taxed and regulated."
I'm confused. Are you for taxes or not?!?!?!....
Published: June 25, 2009 2:57 AM
bob
Imagine how healthy our children would have been if we drove the tobacco industry into the ground in the 18th century!
Hear Hear!
Published: June 25, 2009 3:10 AM
Nick Thomas
Isn't this a tax on US sales, rather than a tax on US manufacturing as the article seems to imply? If so, exports should not be affected.
If you guys think you have it bad, you should see the taxes we have to pay for the privelege of smoking tobacco in the UK!
I don't know about cigars but 20 Marlboro costs the equivalent of $10.
Published: June 25, 2009 4:24 AM
Justin P
"I agree. How far is it from "protecting the children" from tobacco, to "protecting them" from their parents!? After all, if all children were taken by the State, they could assure that the children are only taught the politically correct things."
Sounds like something Hillary proposed in "It takes a Village."
Published: June 25, 2009 5:53 AM
Jake
They should introduce a tax to tax people who condone taxes. The government shouldn't expect any resistance.
Then, once the government has destroyed these people, we'll be rid of people supporting taxes and taxes should disappear along with the government.
Published: June 25, 2009 7:04 AM
Lee
"It's nice to know that people on this website care more about smoking than the health of small children."
It's nice to know you don't care about freedom. It's easy to not be around smoke. Honest to god. I just don't smoke, and I avoid smoky areas. In fact if I want to go to a restaurant, there are areas where people DON'T smoke. Sometimes these areas are the ENTIRE establishment. A shock, I know. Who would have thought that private establishments would enforce their own no smoking policy? Maybe because there are people like you and me who don't like being around smoke. Or people that don't want their children to be around smoke. But ultimately, there's a large enough demand for non smoking areas to warrant a supply of non smoking areas.
So, if taxation will some how magically make small children healthier, then let's cure cancer with slavery. Seriously, because that's what you're implying.
Published: June 25, 2009 10:20 AM
AJ Witoslawski
That isn't a straw man at all.... I mean, it isn't like that tax hike just forced more people out of work and forced the children of those cigar makers to go on the rolls of SCHIP.
Obama's grand plan: fund health insurance for poor children by forcing more children to become poor and enroll for government health insurance for poor children!
I can't be the only one seeing this obvious contradiction.
Published: June 25, 2009 10:33 AM
Sovy Kurosei
This sounds very much like how movie producers or video game developers blame piracy for why their film or game flopped. It is a factor but something that is really insignicant and unlikely it would have made a difference.
Tobacco products is considered to be price inelastic so the customers would still be there, they just went elsewhere. Maybe switched to cigarettes or another brand of cigar or quit smoking because it is bad for their health so the market shrinks.
As someone who worked with smokers in a mine 200 KM South of the Arctic Circle I really have my doubts this is a big reason. I find the biggest reason that people quit or reduce smoking is for health reasons. Having to go outside to smoke in -20 C weather is such a distant third behind an already distant second of the price of cigarettes.
I wish I could say I am sympathetic to Hav-A-Tampa but, as a non-smoker, they can DIAF for all I care.
Published: June 25, 2009 11:50 AM
David Spellman
I heard a radio story on KNX in Los Angeles yesterday bewailing the number of businesses going out of business here. They gave the example of a truck parts manufacturer that was required to make $5 million dollars of environmental or safety related upgrades. The company could not afford to do so and closed up shop and put several hundred workers in the unemployment line.
The government is doing a great job of destroying their own tax base and impoverishing their own citizens. No business could last long with that business model. I wonder how long a government can last even with armed thugs to protect itself?
Published: June 25, 2009 11:58 AM
Grant
David,
It will probably last until they destroy so much wealth that there is nothing to feed the guys with guns. At that point, the guys with guns will get mad and probably take over.
The "problem" (if you want to call it that) is that there is enough capital in the US to keep the parasites alive for awhile longer yet.
It has taken the government and society decades to get to a point where the demographics are such that you can take the screws to smokers without a backlash. Eventually, other useful industries will fall off as well, and then there will be nothing left.
Attitudes like "But won't somebody please think of the CHILDREN!" regardless of the actual effects of the policy aren't helpful at all, either.
Published: June 25, 2009 12:10 PM
2nd Amendment
Russ,
I totally agree with you.
But still, I wouldn't mind somebody next to me smoking one of those new E-Cigarettes which does not emit toxic second-hand smoke.
Curiously, the government is trying to regulate and outlaw those electronic cigarettes which are less dangerous than regular cigarettes.
This would is upside-down and inside-out, LOL !
But yeah, as a Libertarian, I have absolutely no problem with someone smoking tobacco in his own private property or who is allowed to do so in the private property of somebody else.
I have absolutely no problem with cigar rooms, bars, restaurants allowing smoking etc.
Private property owners should have the right to do what they want with their own private property.
In fact, I am even against alcohol permits. Restaurants should have the right to sell alcohol without government controls.
"No, the solution is to apply libertarian principles consistently. If a person is "spreading his smoke around" in a privately owned establishment where the owner allows this (such as a cigar and martini bar), he is doing absolutely nothing wrong. Only if it is in a publicly owned establishment do you have a case here."
Published: June 25, 2009 12:30 PM
2nd Amendment
Grant,
When you mention "guys with guns" who are you talking about ?
Because of the 2nd Amendment, there is a lot of "guys with guns" in the military, in the police but also in the population.
And don't forget "gals with guns" too.
But two guys or two gals with guns aren't necessarily the same.
To be genuinely armed with a gun you need more than the gun and bullets, you also need the will to use it if necessary.
In this sense, there are a lot of guys with a lot of guns who are completely disarmed because they don't have the will to use them for self-defense, especially self-defense against government thugs.
So even though the government hasn't confiscated all the guns in America, the governement was very successful at confiscating the will of the private citizen to defend himself with his own gun.
All those swat teams, all those rules, regulations and demonization of gun owners has scared the hell out of a lot of "guys with guns" into total compliance with government.
A government knows that what truly arms a population is not their guns but their will to use their guns.
And the government was effectively efficient at confiscating this will.
And there is no Amendment garanteeing the safety of this free will.
So in this sense, even though the USA has 300 Million guns in circulation, when was the last time you saw a nation-wide uprizing against the government ?
So in this sense, the population of Iran is much better armed than the population of the USA !
Even though it has no guns and is facing a tyrannical government.
Will Power is mightier than fire-power, and the government knows that !
Published: June 25, 2009 12:38 PM
Home Biz Tax Coach
I have a broad civil question, if governments didn't impose taxes, how would we pay for services that are basic and essential to everyone?
BTW, cigar sales typically raise and fall in popularity in this country. When industries wane businesses close.
Published: June 25, 2009 2:38 PM
Zach Bush
Tax Coach,
The answer lies within your question.
You assume that the government services provided via taxation are basic and essential.
If this is true then the profit motive and price system will guide investors to meet the demands of the consumers in those areas. Thus, there is no need for taxation.
If this is not true then the profit motive and price system will guide investors to meet the demands of consumers in other areas. Again, there is no need for taxation.
Published: June 25, 2009 2:56 PM
Russ
@Tax Coach:
Zach Bush's answer is the anarcho-libertarian answer to your question, but he doesn't speak for everyone. There are those of us here, however, who like Mises himself did, believe that a minimal government is necessary. We believe that, at the very least, the legal system, military and diplomatic corps (the traditional "night watchman" state) are necessary, could not practically be supplied by the free market, and must be funded by taxes. We might quibble about whether roads and such can be privately provided. But we agree that "redistribution of wealth" (i.e. socialism) is not a necessity, and thus wrong.
Published: June 26, 2009 1:30 PM
Zach Bush
@Russ,
In what way did I ever state in my post that I felt that there is no need for government?
Government services can be paid for by means other than taxation. All the examples you list above can be provided for via fees.
Published: June 27, 2009 7:12 PM