Smokers moving back to the pipe due to tax increase

We’ve been trying to figure out why we’ve seen a dramatic spike in pipe sales this past month, and now we believe we have the answer: Taxes

On April 1st 2009 many Americans saw tangible signs that our federal government had changed hands and that congress and the new president were hard at work finding new and deceptive ways to take and then spend our money. That was the day that the new federal excise tax increase took effect. Actually most cigarette manufacturers hiked their prices in March in anticipation of the tax increase. The new tax hike is hidden (sort of) because it was imposed at the wholesale level. That meant that consumers won’t see a new or inflated tax detailed on the case register tape, but the retail price will be higher.

What makes this worse is that the way prices are calculated at each step along the way to the consumer. For example, the maker of Camel, Salem and Kool cigarettes, R.J. Reynolds had to hike their wholesale price by 44 cents a pack. Now, for those of you with no retails sales experience, let me explain how things work down at the ol’ 7-11. Retail price is often double the wholesale cost. This mark-up allows the retailer to cover the payment on their property; cover the costs of having employees available to keep the Slurpy machine clean and cold; and to cover the cost of theft and if all goes well leave a little something for the owner to reinvest in new coffee machines and condom dispensers. So, while R.J. Reynolds collects an additional 44 cents and hands it over to our buddies in the Treasury Department, the consumer will actually pay an additional 88 cents per pack at the cash register! And don’t forget that this new tax is in addition to the taxes that were already built into the price. Oh, and let’s also not forget that the sales tax that our cities and states charge are a percentage of the retail price, so if your sales tax is 6 percent, this means your sales tax just went up 5 cents too!

Theoretically the revenue generated from this tax increase will be used to expand coverage under the State Children's Health Insurance Program. Who could be against sick children? Boo-frickin’-woo!

If these children are so needy then let’s ALL take care of them; not just the smokers!

This increase was signed into law in by President Obama in February, and it calls for a 62-cents-a-pack increase, to $1.01, in federal excise taxes on cigarettes as well as HUGE increases in taxes on little cigars, cigars, and pipe and chewing tobacco.

I mostly smoke a pipe, but on occasion I like to pick-up a package of Backwood Smokes. These are sweet little cigars that our congress felt were WAY under taxed, so their tax burden (my new tax burden) went from 3.7 cents per pack to $1.01 a pack!

The pipe tobacco tax increased to $.18 per ounce ($2.8126 per pound), so pipe’s still represent a relative value for the tobacco smoker.

What we believe we are seeing is:
  • Cigarette smokers trying to quit by switching to pipes, which are not typically inhaled.
  • Cigarette smokers who wish to continue smoking, but who will smoke a pipe occasionally rather than cigarettes regularly.
  • Smokers of small cigars who wish to continue smoking, but who will smoke a pipe rather than pay the ridiculous new taxes on small cigars.
Here's the government website where you can learn more about the tax hike on tobacco.

We invite you to think of as your source for cool-burning and sweet tasting Missouri Meerschaum corn cob pipes. Since 1869 Americans have enjoyed and insisted on genuine Missouri Meerschaum pipes, and now you know why you should too.

1 comment:

Anonymous said...

A large number of new pipe tobacco buyers are roll-your-own smokers.

I smoke both a pipe and RYO and for a long time enjoyed the same tax rate of both.

As of April 1st, RYO tax went from $1.09 a lb. to $24.78! As a result, many manufacturers of RYO blends are now labeling products as pipe tobacco.

It's my hope that since the government is wise to this, they will somehow refrain from taxing real pipe tobacco the same way. Naive, I know.