Obama's New Cigar Tax Might Just Kill Miami's Torcedores
Tendrils of earthy smoke snake through a room on the edge of Little Havana, past old men in guayaberas slapping dominoes on a folding table and a long counter where a wrinkled 80-year-old brews espresso.
Near the front window facing NW Seventh Street, Dionisio Gonzalez gently peels a cured deep-brown leaf from his table and expertly layers it atop a growing pile of tobacco.
Before he fled to Miami last year, Gonzalez spent 53 years honing his cigar-rolling technique at Havana's legendary H. Upmann factory, where he landed his first job at age 14.
Like thousands of others across South Florida, he now earns a living in the heart of America's cigar industry, where some experts estimate 75 percent of the nation's 272 million hand-rolled cigars originate every year.
Enjoy it while it lasts. Miami's cigar-makers are scrambling to survive past April 1, when President Obama's new State Children's Health Insurance Plan takes effect -- and brings with it a 900 percent tax increase on every single cigar made or imported to the States.
Obama's program will bring health insurance to thousands of poor kids, largely through an increased tax on cigarette packs. Cigar producers are quick to say they support the SCHIP program -- and even the increased cigarette taxes, which amount to double the current levy.
But why, they ask, does the legislation also include a separate, much more massive increase on artisan, niche-industry cigars, from four cents per cigar to 40.26 cents?
In Miami, where dozens of mom-and-pop shops still roll parejos and torpedos by hand along Calle Ocho, the tenfold tax could spell the end of the line for some.
"We're seeing the potential for mass closings and unemployment in the industry," says Norm Sharp, president of the Cigar Association of America. "This is one of the most volatile, uncertain times for the cigar industry that anyone can recall."
At the Fort Lauderdale-based Alec Bradley Cigar Company, owner Alan Rubin expects to pay more than $1 million in extra taxes next year. For each shipment of 1 million cigars he brings in from his company's factories in Nicaragua and Costa Rica, his company's tax cost will now rise from $40,000 to more than $400,000.
"If you look at this on a more global level, this could affect well over 100,000 workers," Rubin says. "You have literally entire cities in Central America that are living and dying on producing handmade premium cigars."
Inside his hazy office, Gutman guillotines the tip off a fresh cigar. His assistant, Jose Bermudez, gestures toward Gonzalez and his fellow torcedores.
"We were all hoping this was just an April Fool's joke," Bermudez says.