Tales of the Smoke Police
Cigars Under Siege Tobacconists and smokers throughout California are fighting a desperate battle against antitobacco forces.
From the Print Edition:
Bo Derek, Jul/Aug 00
California is a tough place for cigar lovers. From Eureka to San Diego, tobacconists and smokers are under attack. Recently passed tobacco taxes have become crippling, and strictly enforced antismoking laws have severely limited the places where one can enjoy a good robusto. This harsh reality feels especially cruel in a city as rakish, money-driven and class-conscious as Los Angeles, where past moguls like Louis B. Mayer would have looked naked without Churchills clamped between their teeth. And who can forget all the great images of modern-day icons like Jack Nicholson and Arnold Schwarzenegger puffing awat away? Nobody would have ever dreamed of suggesting that they extinguish their cigars--not, at least, until recently.
Today, you can close a billion-dollar deal in the $20 million building you own in the heart of Beverly Hills and, legally speaking, your secretary can bully you into refraining from lighting up a celebratory smoke. California law states that cigar smoking is verboten in almost any public area--not just in office buildings and shopping malls, but also in taverns, nightclubs, restaurants, even cigar bars. (Tobacconists and private clubs are the few exceptions.) You want to be out in public in California? Fine. Just don't expect to enjoy a cigar.
As rough as the law is for cigar smokers, it is even tougher on tobacconists. Thanks to Proposition 10, a referendum that was spearheaded by actor-director Rob Reiner, state taxes on cigars have risen from 26 percent to 66.5 percent. Even worse, retailers must pay a "floor tax" on the cigars they have in stock rather than on cigars sold, forcing them to pay tax on income that is not yet realized. Considering that many cigar shops are overstocked on the good smokes they had back-ordered during the boom, it makes for tricky finances. "A lot of us retailers have merchandise that we don't need," says the owner of a Los Angeles-area cigar shop. "There's a lot of product in the pipeline, taxes have caused prices to increase dramatically in California, and nothing is moving."
Arguably, the floor tax is what's immediately most damaging to retailers. "The floor-tax [is unusual]," acknowledges Bill Fader, executive director of the Retail Tobacco Dealers of America and owner of Fader's tobacconist, a Baltimore institution. "If you knew about the tax in advance, you may not have even bought the product." Viewing the situation on a national level, Fader is concerned that other states will take a cue from California. "In Louisiana they tried to triple the OTP [Other (than cigarette) Tobacco Products] tax. Happily it was defeated. But I do see continued increases in OTP taxes. There is not a thing to do about it. It's state by state, and they look at tobacco tax as a ready revenue."
Combine that high cost of doing business with the hostility toward puffing in public and you can imagine the chilling effect that West Coast retailers are enduring. "Guys come into my store and tell me that they remember paying $5 for cigars that we now have to charge $8 for," says Laith Haddad, owner of Cuban Seed Cigar, a cozy, handsome, well-stocked shop located on Sunset Strip. "The older guys who've been buying cigars for 25, 30 years--they are really pissed off. Those guys have seen prices rise through the cigar boom that began back in 1995." Now, of course, with taxes invariably being passed on to consumers, they pay more than ever.
Or at least they would be paying more than ever if they were buying cigars in any kind of quantity. "Box sales have ceased," reports Charles Janigian, managing director at JMG International, a San Jose-based cigar distributor. The head of the California Association of Retail Tobacconiss, Inc., Janigian has seen the devastation from a broad perspective. "I just visited a bunch of stores and distributors in Southern California. And everybody is all over the place, scrambling for business. People have had to let personnel go. There've been divorces and family crises. You have people with $100,000 of inventory having to pay $35,000 [in floor tax]. What business could survive that? This is extortion."
Established tobacconists are faring better than the newcomers are. Deeply entrenched in the cigar world, Haddad and his family, for example, have been selling tobacco since 1941. They got their start by importing bulk tobacco from Cuba and Honduras, supplying cigarmakers in the western United States. Over time they built a successful company, and by the time Laith entered the fold in the 1990s, the Haddads had launched a wholesaling business. Laith Haddad runs the wholesale arm of the company as well as the retail shop, both of which had been doing extraordinarily well--until Proposition 10.
To hear Haddad discuss his wholesale business--which has dropped by 30 to 40 percent--is to get a strong overview of the state of cigars in Southern California. "Proposition 10 adversely affected our wholesale business," he says, as he puffs a cigar on a sofa at the front of his shop. "The retailers are very nervous. [They] tell us that their shelves are full and they don't want any more cigars. A lot of stores have closed down. I have a friend named Roy who had three stores in Southern California. Two of the stores he sold and one he shut. He moved to Las Vegas [where cigars are not so heavily taxed] and he is doing well there. People who thought they could make a million bucks in this business have found out that it's not so easy." Like other tobacconists, Haddad grouses about the slim margin of victory for Proposition 10--it won by only 71,000 votes in a state with 14,000,000 registered voters--and the way in which it was sold to the voters. It was presented as a tax on cigarettes--not all tobacco products--for the benefit of California public schools.
"People were misled," says Haddad. "I'd ask people if they voted for Proposition 10 and they would say, 'Sure I did. It's an extra 50 cents per pack for the kids. I don't smoke cigarettes, so it won't affect me.' I had to tell them that it would put an increased tax on cigars and pipe tobacco. But nobody knew that. The whole campaign was against cigarettes. It was never about cigars." This was underscored by California smokers who seemed to be supporting the bill--without completely understanding its repercussions. Celebrity heat helped to glamorize the cause--Charles Janigian maintains that a number of Hollywood's top stars contributed money to help promote Proposition 10.
As for the referendum's biggest booster, Reiner spokesman Chad Griffin says the bill's supporters never concealed the issue. "From the beginning it was a tax for all tobacco products. It was always talked about as a tobacco tax. The ballot made it clear that it was a tobacco tax and not a cigarette tax." Reiner's active support for Prop 10 has made him a lightning rod for the referendum's opponents, but Griffin says, "It's not Rob. He's not picking on cigar smokers. This initiative was sponsored by 140 children's health groups. Cigarettes, cigars and smokeless tobacco have had a detrimental effect on families. This is about the dangers of secondhand smoke on children and the dangers of smoking prenatally, and [it's intended to provide] programs that promote and support the healthy development of young children. The initiative mandates that Prop 10 dollars be used for antismoking [causes]."
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