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Cigar sellers outraged by tax plan

Cigar store owners are fuming over a proposed federal tobacco tax increase that would hit cigar smokers the hardest.

The tax jump is part of a controversial proposal to expand the State Children's Health Insurance Program (SCHIP) to provide health coverage for more uninsured youngsters. A bill expanding eligibility for SCHIP was vetoed by President Bush last week, and supporters are marshaling the House votes needed to override the veto. A vote is scheduled next week.

"This bill, as it now stands, will destroy the cigar industry in New Jersey and the rest of the country," said Gary Kolesaire, owner of The Tobacco Shop in Ridgewood.

The bill would boost SCHIP spending by $35 billion, and would fund the proposal by hefty tax increases on all forms of tobacco, including cigarettes, cigars and pipe tobacco.

Cigars would face the largest-percentage increase, with the maximum tax per cigar being boosted to $3 from 5 cents. That amounts to a nearly 6,000 percent increase, according to Chris McCalla, legislative director of the International Premium Cigar & Pipe Retailers Association (IPCPRA), based in Columbus, Ga. "It's effectively doubling the price of a cigar," he said.

"I look at a cigar as an affordable luxury,'' McCalla said. "It's a product of socialization and leisure, not a product of addiction, as cigarettes are.

For a lot of middle-class people who buy cigars, who can afford that $6 cigar, they're going to think twice about a cigar that's going to cost them $12 to even $15."

Kolesaire and his wife, Barbara, have been selling premium cigars in Ridgewood's downtown for 29 years. Their business has survived changes in smoking habits and bans on public smoking. However, Kolesaire doesn't think it can survive price increases some industry experts predict could amount to an extra $6 a cigar for consumers.

"If they put us out of business with this, maybe every tobacconist and employee in the state can get unemployment, and then their children can get SCHIP," Kolesaire said.

Kolesaire and other cigar store owners have been collecting signatures on petitions and e-mailing and faxing members of the state's congressional delegation to urge them to support the veto.

JR Cigars, a cigar chain based in Whippany, sent an e-mail alert to its customers and posted sign-up sheets in its stores where cigar smokers could register their opposition. "It's going to affect everybody, from the retail shops, to the wholesalers and distributors, to the countries that manufacture the cigars," said JR Vice President Jean Vargas.

The cigar industry has mounted a sophisticated lobbying effort, led by groups such as the IPCPRA and the National Association of Tobacco Outlets (NATO). The groups' Web sites allow retailers to see how their state's representatives voted, and to e-mail lawmakers.

The industry also is using You Tube, the video network site, to lobby against the measure.

One video contains footage of Central American workers making cigars and claims thousands of workers in Nicaragua, Honduras and the Dominican Republic would be put out of work if Americans stop buying cigars.

Andy Kerstein, president of NATO and owner of six tobacco shops in Middlesex, Monmouth and Atlantic counties, said such a large tax hike could end up causing cigar smokers to turn to foreign sources to beat the levy.

"New Jersey's already learned this lesson,'' Kerstein said.

"New Jersey raises tobacco taxes and Delaware retailers rake in profits. Cigar smokers are going to stop buying in local stores and turn to the Internet. We live in a worldwide economy."

Most store owners and industry lobbyists are confident that override supporters do not have the two-thirds majority they need to overturn Bush's veto.