Several things conspired to hurt Altadis' sales, 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.
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.
Wednesday, June 24, 2009
A simple narrative. Taxes raise the price of a good. Demands trends downward. Fewer goods produced. Jobs lost. Taxes matter.