THE SCHIP and TAXES ON CIGARS

Dear Customers~

Over the past year you have heard me refer to or write about "SCHIP". While I thought that everyone knew about S-Chip, I continue to get questions about what it is and what it means to Cigar Smokers. So I am going to put it in as simple terms as I can....

The State Children's Health Insurance Program (SCHIP). This is and was a 10 year program that ran from 1997 to DEC 2007 that provided Health Insurance for children of low income families. A low income family under the original bill was a family earning up to 200% of what was determined to be the national poverty level. In 1997 this meant a 2 Parent Family with 2 children under the age of 19 were considered eligible for SCHIP if they earned less that $41,300. As the bill neared expiration in 1997 the Senate introduced legislation to greatly expand the limits. The new S-CHIP that was proposed increased the qualifying income level to 400% of the national poverty level and included children under the age of 25. This would have meant that a 2 Parent Family with 2 Children under the age of 25 earning less than $82,600 would have been eligible for S-Chip benefits!

While there was not much that President Bush did that I agreed with, I will give him credit for this....He Vetoed the legislation twice after it was passed by the Senate.....At the end of 2007, President Bush signed an extension of the current program to cover current enrollment levels through March 2009 so that problematic issues could be fixed in the program prior to further extension. In other words, just like the Auto Bail Out....He punted the issue to the incoming Obama Team! Which proves George cannot only fumble....
He can Punt too!

So what does this mean for cigar smokers and Cigar Retailers, and Wholesalers?

Well folks the picture is not real rosy. Late last fall it looked like the industry had worked out what they thought was an acceptable compromise from the original bill that called for as much as a 10,000% increase in the cost of cigars. The compromise was rumored to be a 53% tax based on the cost of the cigar with a cap of $3.00 per cigar. At the last minute the deal fell apart and now we are looking at a Democratic President and a Democratic Party in control in Washington! While the Cigar Association and our lobbyists are working to negotiate something lower....my guess is that the above will be the low end of the potential increase! I think the $3 per cigar number will get lowered to $1.50, but I think the 53% could go higher to raise the price of the machine made cheaper cigars.....But then what do I know....Who thought my Detroit Lions would finish 0 - 16 this year!

So the bottom line is real simple.....sometime between Inauguration and my guess is June 1st, there will be an increase on the price of cigars to help fund the S-Chip Bill. I also think something else like Beer will be taxed to assist in the funding before it is done. The only thing you can do is plan ahead and make sure you stock up prior to the increase.

Once we know for certain what the increase will be and when it will take place we will notify you ASAP. We anticipate that you should have plenty of notice to stock up on your favorite cigars at that time! The increase will not go into effect overnight, so there is no need to listen the BS of the other suppliers in the industry that are playing the FEAR card on you at this time telling you BUY now! As of today everything is just speculation, the date of the tax increase is unknown, the amount is unknown, and for that matter if there will even be a tax increase is not 100% for certain. In this economy raising taxes on anything is dangerous.

However, as things heat up and the timeline of the current funding expiration date moves closer, the one thing that could happen unexpectedly would be another price increase on the part of the manufacturers. It is my guess that they will do this in anticipation of the tax increase and then at the time of the actual tax increase they will not raise prices the full amount of the tax! If it happens, look for about a 10% increase in February some time.

Ok, now there you have it! You are now as smart as me when it comes to the S-Chip. I wouldn't go around bragging to anyone that you are as smart as me though, but if you are on the ball, you might want to start thinking about where you are going to store an extra 6 months worth of cigars!

Happy New Year and you can count on us keeping you informed.

Cigar Dan

Quality Fresh Cigars, Inc.

CigarFox.com