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Cigar Taxes to Stay Put: Veto Override on SCHIP Fails

Posted: Thursday, October 18, 2007

By David Savona

The American cigar industry breathed a collective sigh of relief this afternoon as Congress failed to override President Bush's veto of the $35 billion expansion of the State Children's Health Insurance Program (SCHIP). The bill would have raised the federal excise tax on large cigars from five cents to as much as $3.

The House of Representatives today voted 273 to 156 in favor of SCHIP expansion, 13 votes short of the two-thirds majority needed to override the veto.

"If this tax had gone through it would have devastated the cigar industry," said Ernesto Perez-Carrillo, the maker of La Gloria Cubana cigars. "It would have harmed not only cigar manufacturers, but also retailers."

"I'm extremely happy," said La Flor Dominicana's Litto Gomez. "It was very close, it was very dangerous. Thank God it came out the right way."

Over the past several weeks, the cigar industry's trade groups as well as individual cigar companies have lobbied hard to keep the cigar tax from soaring.

Lawmakers who are pro-SCHIP are expected to continue the push for more funding.

"This is only the first round in what will most likely be a continuing battle for the next several months," said Chris McCalla, legislative director of the International Premium Cigar & Pipe Retailers Association (IPCPR). "SCHIP expansion and extension of the current program will be sought by congressional democrats. We have already begun communicating and working with congressional leaders and their states, taking the position that if a tax increase in cigars must exist, that a realistic, manageable increase must be a part of the overall proposal."

Said Gomez, "Now it's going to give us a chance to go back to Congress and find a formula where we can give them the money they need without killing the industry. It's a great opportunity for us."