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Tax Leaves Cigarmakers Feeling Burned

News Channel 8 photo by PETER MASA

Wallace Reyes of Gonzalez Habano Cigar Co. fears new taxes will kill the cigar industry in Tampa.

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By SHERRI ACKERMAN

sackerman@tampatrib.com

Published: April 2, 2009

TAMPA - Cigar-rolling put Tampa on the map, but some cigarmakers say a new federal tax on tobacco could stub it out.

"It's another nail in the coffin," lamented Wallace Reyes of Gonzalez Habano Cigar Co., one of only a handful of manufacturers remaining in Ybor City. "I predict that in the next 15 years ... cigarmaking in Tampa is going to be a memory."

The increase took effect Wednesday, raising the tax from 5 cents to about 40 cents on large cigars, a bit less for smaller stogies.

That means the price of a bundle of 25 "sticks" Juan Lopez Jr. sells in his West Tampa store will jump from $18 to $28. The $1,000 in taxes he used to pay to import 20,000 cigars from his suppliers in Central America will now cost $8,000.

"A lot of customers are saying they're going to quit smoking," said Lopez, who estimates he's already lost 75 percent of his clientele during this recession. "This is going to kill the industry at a time when we're already hurting."

The revenue generated by the new tax will help raise $35 billion for health care for uninsured children. The increase also affects cigarettes, which will go up 62 cents a pack, and loose tobacco, which will cost pipe smokers and those who hand-roll their smokes $25 a pound.

"It's wrong; it's wrong," insisted Dan Barco, owner of King Corona Cigars in Ybor City. A longtime cigar retailer, his wife's grandparents worked in the cigar factories that began to flourish here in the late 1890s. "I don't mind paying taxes, but this is just over the top. It's too much."

Barco took issue with other industries crying for bailouts, while the tobacco industry weathers its losses without government assistance. He also disagrees with using the tax to fund children's health insurance.

"Do we have a problem with 6-year-olds smoking cigars?" he asked. Why not tax the fast-food giants or other industries that directly affect children's health?

"Tobacco is just an easy mark," he said.

The tax threatens a $2 billion cigar industry in Florida, where 75 percent of the nation's cigarmakers and importers are located. Already, the recession has taken its toll.

Reyes estimated he has lost 40 percent of his business in the past two years. He closed the doors on his West Tampa shop in December and moved to the Ybor City State Museum, where he sells his handmade cigars for $5.89 a piece.

Now, between the federal tax, a 40 cent state tax and the 7 cents he pays the U.S. Department of Agriculture for using foreign tobacco, he figures that same cigar will cost $1 more.

"I don't think there is a cigar company in town that can tell you they are doing well," the 56-year-old grandmaster roller said.

Tampa, once dubbed the Cigar Capital of the World, has only about 33 stores in a 30-mile area, Reyes said. In its heyday, before the Great Depression, the city had more than 100 factories that employed thousands of cigar rollers.

Today, he knows of only five grandmasters like him.

Cigar-rolling, he said, will soon be something people see only in museums.

Information from the Associated Press was used in this report. Reporter Sherri Ackerman can be reached at (813) 259-7144.

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