It is done. The “Other Tobacco Products” tax, which includes cigars, has been raised from 46 percent in New York to 75 percent. The measure takes effect August 1, 2010 in one of the largest premium cigar markets in the country. Yet, we shouldn’t consider this final. We can work to have this pressure alleviated, but it’s going to take time and effort. As our industry regroups for the battle ahead, it makes sense to pause for a moment and really understand what’s just happened to us – if for no other reason than to make sure we take the right approach in the coming months.
There are many misconceptions flying around about the cigar tax – in Albany, in the public and even within our industry. It’s easy to be seduced into thinking that the tax was intended to destroy the premium cigar market. Fall into this thinking, though, and you cost yourself the ability to take action to remedy the situation. This tax would include gas station cigars, Gurkha Cigars, Oliva Serie O Cigars, Cigar Humidors, and any other type of cigar in the state.
Take a look at the four misconceptions about the New York cigar tax below, and use them to refine your plans for the coming months.
1. It was intended to be punitive
As an industry, we need to get this thought out of our heads as quickly as possible. Taking the stance that we’re being punished as an industry (intentionally) is counterproductive. The goal of this tax was never to put tobacconists out of business: it was to close a gap in the budget. Sure, it’s easier to go after the cigar industry than it is to squeeze more tax revenue out of just about any other sector. And, there’s no doubt that this tax will be functionally punitive. That wasn’t the goal, however, and fighting on those grounds isn’t likely to work. As we look for ways to fix this legislative error, we need to focus on the revenue – particularly the fact that the tax will fail in its sole objective of generating more money for the state.
2. People know what this tax is
The average guy out on the street seems to think that the tax was intended to be punitive and is fine with that. How many interviews have you seen where the “man on the street” said some variation of, “People shouldn’t be smoking anyway”? We need to battle this misconception in the media, in the legislature and on a person-by-person basis.
3. The tax will work
Since the goal has been to use the OTP tax to increase revenues for the state, it stands to reason that a failed tax won’t add to Albany’s coffers. We need to keep an eye on this from the start. As the situation unfolds and we see that revenue targets aren’t being hit, we need to make people aware of the issue. Heading into the November elections, the failure of the cigar tax should be made a failure of government. It isn’t about us – it’s about them. Use the failed OTP tax to raise awareness of the fiscal ineptitude of the reps who voted for it, and use that as leverage to bring cigar-friendly candidates into office.
4. We’re stuck with a new reality
We could be – but it’s uncertain. With the possibility of legislative changes in November, if cigar smokers in New York can mobilize and influence the elections, we shouldn’t give up hope or effort. But, it is difficult to undo a tax. The key will be to focus on the ineffectiveness of the tax – not the fact that it’s unfair.