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The End of Retail Cigar Stores in California?

Coming up on the ballot this November is The Tobacco Tax Act of 2006, or Propostion 86. This piece of legislation, if passed, would triple the current tax on tobacco products in California, effectively destroying the retail cigar business in the state.

This is the latest in a continual, nation-wide onslaught from the anti-tobacco lobby, whose underlying goal is to tax tobacco so much that it is no longer available, effectively causing prohibition through taxation.

California already has an .87 cent tax on a pack of cigarettes, or 46.76% of the wholesale price of cigars sold in the state. If this new legislation passes in November it would increase the tax on a pack of cigarettes to $3.47, and the tax rate on cigars would be 135%. Under the current system a box of cigars that costs a retailer $100 wholesale ends up costing $146 before it even hits the shelf. If Proposition 86 becomes law that same box would cost the retailer $235 before he adds on any margin to cover his overhead, let alone a fair profit margin.

So by now I'm sure you're shocked by this draconian law. Too bad that was the good part or it. What's really bad is the part of the law that would collect a back tax if passed on any inventory a retailer has on hand as of January 1st, 2007. This tax rate will be 88%. This means if a retailer is carrying $100,000 dollars in inventory come the first of next year he will have to cut a check for $88,000 to the state of California.

There is already word of a few cigar retailers trying to sell their shops, as they can't afford to take a gamble on what the voters of California will do this November. If this law passes look to see a lot more retailers make the same move, or end up declaring bankruptcy.

So what will this new law accomplish for California? According to it's creators the money will go into a fund to for health programs and anti-tobacco advertising. The irony is that the state will end up collecting much less tax, as shops close and people resort to buying their cigars online, or on the black market this law is sure to create.

Smokers and those who recognize that - in California there is an enormous debt, a well-deserved anti-business reputation and serious problems with an exploding population, terrible school achievement and a failing infrastructure, there are better ways to spend time and effort than to punish smokers - must band together to defeat this measure.
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