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You can still light up our cigars and pipes
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Sunday, 07 October 2007
The president vetoed legislation that would have taxed into insolvency the small cigar and pipe tobacco industry in the US. The tax change would have raised levies on bulk tobacco by a factor of nearly 10 and more than doubled the tax on cigars, creating conditions that would have been the death knell for a small industry.   
In addition, the tax change and the resulting business changes would have also created a near political panic in developing nations, including Honduras, Nicaragua and the Dominican Republic. Each depends on the US cigar and pipe tobacco industry to employ a crucial base of its local labor force. And tobacco is a cash crop that successfully competes with illegal drug crops.

The tax changes would likely have caused severe economic hardship and major political instability if not coupled with US economic aid. We could have been looking at a wave of refugees heading to our borders as well as further expansion of illegal drug crops, which are still pervasive in the Caribbean and Central and South America.

Ironically, the tax was expected to nearly fully fund some $50 billion in additional federal spending on national health insurance--but there was no proper economic analysis as to the net receipts from the massive tax changes.

Even one of the leading GOP members in the Senate who voted for the tax was unaware of both the actual size of the cigar and pipe tobacco market (it’s small, less than 5 percent of the US tobacco market) and of the economic consequences, including smuggling, the shrinking of a working and middle-class market and other tax avoidance schemes.
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The result would have been that general revenues would have to be allocated to actually fund the $50 billion program, which begs the question, Why not just propose to the American people that we hike our income tax rate across the board to pay for socialized medicine?

Let the people really decide, rather than trying to sneak it in by creating another entitlement program without real funding.

For now, we can breathe a big sigh of relief--and still light up our cigars and pipes.
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