Patrick and Patrick of the Stogie Guys are reporting live this weekend from the International Premium Cigar and Pipe Retailers Association Trade Show in New Orleans. (Man, I’m missing all the fun events in New Orleans this summer!) My favorite bit so far is this clever subterfuge to get around the new SCHIP tax:
In our preview on Thursday we mentioned Arganese was creating a two-in-one cigar designed to minimize the SCHIP tax. Below is a photo of the cigar, called “S-This.” What might not be clear from the photo is the cigar is really two smokes, connected at their heads with an extra bit of wrapper that can easily be removed by the smoker. So while for tax purposes the consumer is buying five cigars, in reality they get ten smokes. Sneaky.
Joining two stogies and letting the consumer cut them apart is a great idea. I don’t know how these smoke, but I’d buy some just to stick it to the man.
Previously:
Will SCHIP sink the states?
SCHIP and “the” tobacco tax
Children, say “thank you” for smoking
Jacob Grier is a freelance writer, barista, mixologist, and magician in Portland, OR. He writes, eats, and drinks a lot. His articles have appeared in The Washington Post, Reason Online, The Oregonian, and other publications.
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Arganese are decent cigars. I prefer the Maduro and Nicaraguan labels. My only problem with them is that I have to mature them in my humidor for at least three months…which is ok, because I rotate my cigars regularly, but sometimes I just want to smoke one straight from the box.
That IS a pretty crafty idea, but give the gubmint enough time and they’ll start taxing by the inch and ring gauge.
*SIGH*
The gubmint’s ability to slip their hand into the till never ceases to amaze me…
“The man” here being defined as “sick children in need of medical care.”
@Ben: If SCHIP is a worthwhile program it ought to be funded by general revenues. Also, the loss of funds this cigar would create is nothing compared to the government’s own projected reductions caused by reduced smoking. Tobacco taxes were never expected to be a stable source of revenue.
All worthwhile points.
Nevertheless, none of your points about the flaws in the funding for SCHIP justify engaging in subterfuge to avoid paying a tax, especially considering what the tax funds. You’ll pardon me if this practice doesn’t inspire in me the same rush of admiration as, say, the Montgomery Bus Boycott or the Boston Tea Party.
@Ben: The SCHIP tax increases that Arganese is minimizing (after all he isn’t fully avoiding the tax) is a public policy disaster even if you accept the stated goals of the program. For every new child who gets “health insurance” two move from private insurance to government funded insurance. (Note: saying a child doesn’t have health insurance doesn’t mean he doesn’t get health care.) And it does all that while depending on an ever diminishing revenue source.
Further, taxes have real consequences. I’ve spoken with multiple cigar makers who are quite certain that they’ll have to eliminate jobs because of the burden of the tax. The jobs they’ll eliminate are some of the best available in their communities. Cigar rollers are primarily women, and cigar factories usually provide free schooling for their children, as well as health care far beyond what would otherwise be available (to their employees and their families).
If this scheme to minimize the punitive SCHIP taxes lets Arganese employ a few extra employees that otherwise would be laid off then indeed it is heroic, and people (like presumably yourself) who favor the tax need to own the fact that your policy kicks children in places like Honduras, Nicaragua and the Dominican Republic out of school and limits their access to actual health care .
Finally, what Arganese is doing is perfectly legal. In other words, they are no more required to pay more in taxes than what is required by the letter of the law than you are. If you value SCHIP so much, I encourage you to send some extra money into the IRS rather than getting criticizing a company for protecting their customers, their bottom line, and their employees’ jobs.
@Jacob: From what I understand these are the same blend as Arganese’ regular line (just with minimal packaging to keep the cost down). So if you like their normal lines, you’ll probably like S-This.
I never said I support funding SCHIP through a cigar tax. I actually agree that it’s a ridiculously unreliable source of revenue. It’s a bad policy and I’m not defending it. (The funding source, that is, not the concept of providing health insurance for children.)
What I don’t condone is engaging in deception to avoid the law. This brings to mind a similar incident Jacob blogged about in December of 2008. He discussed an over-the-top FDA raid on a guy who was selling raw milk for human consumption, which is apparently illegal. I agreed with Jacob that the policy was stupid and that the FDA was being ridiculous in doing some sort of sting on a raw milk producer. But none of that made it okay for the seller to do what he did: mislabeling the milk as “not for human consumption” in order to avoid the regulation.
Perhaps the cigar example is less egregious than the mislabeling example, but my point is the same: Just because you disagree with a policy…that doesn’t make it okay to break the law, or to engage in deception in hopes of avoiding the effects of the law (i.e. paying taxes).
I should clarify that statement. Certain laws are so evil that it is okay to break the law. That, of course, is civil disobedience. But even those who engage in such civil disobedience a la Martin Luther King recognize and accept the punishment for breaking the law. Hell, they welcome the punishment because it helps to bring media attention to the injustice of the law they are defying. They broke the law boldly and openly in order to show the world what was wrong with the law.
That’s not what the raw milk and cigar sellers are doing. They aren’t breaking the law for the purpose of being punished and highlighting the idiocy of certain laws. They are trying to avoid punishment (raw milk case) or paying a tax (cigar case) by lying. Instead of breaking the law openly in order to defy it, they are engaging in subterfuge/deceit in hopes that they don’t get caught, so that they can improve their bottom line. No amount of analysis about how stupid the law is makes that okay.
@Ben: The important point here is that they’re presumably not breaking the law. They’re making the best of the law as it’s written. You may not like it in this case, but what makes what they do different from what individuals and companies do all the time to minimize their tax liability? When the tax code is as complicated as ours is, behavior changes to take advantage of it.
Congress could have prevented this by passing a law assigning taxes by the weight of tobacco sold. If they’d done that, we’d instead see companies trimming a little off their larger cigars to get them into a lower weight bracket to minimize the tax. Would that be immoral too?
All taxes create incentives for people to find ways to minimize their burden. It’s the duty of legislators to write effective code, not of the taxed to forego whatever advantages they can.
It’s not the minimizing taxes that I find immoral. (Although the program that the taxes fund makes the behavior in question seem even less “heroic.”) It’s the lying.
Cutting a bit off of cigars to lower their weight wouldn’t be a lie unless they claimed it was still of a certain weight (if that even matters to cigar customers. Here, I’ll profess my ignorance). But here, they’re treating 2 smokes as 1. It’s not…it’s 2 smokes. They’re lying in order to avoid a tax.
Now is this a terrible sin on the scale of, oh, Bernie Madoff lying to his investors and making off with their money? No, of course not. There’s always lighter and darker shades of gray.
But I still can’t applaud it.
@Ben: It’s just taking advantage of a loophole in the law, but I’m not sure how that equals lying. The politicians who passed the law did a shoddy job of defining what a cigar is and Arganese exploited this flaw in the law. Given that you and I apparently agree that the law itself was bad policy, it shouldn’t come as a surprise that the specifics of the law were poorly formulated as well.
Not to mention the fact that taking advantage of the loophole means more good jobs (with health care) in the Dominican where Arganese is based.
How does that factor into your sliding scale with the Boston Tea Party on one end and Bernie Madoff on the other?
It’s a descent than any other cigar.
This Cigar have it’s own image in itself.
First, the comment on lying; perhaps I am missing something, but the name of the product is S-THIS, Gene Arganese is broadcasting what he is doing, there is no hiding, there is no miscommunication. He has chosen to do this in broad daylight; whatever else you have against what he is doing you can’t take that away from him. If the federal government chooses to they can take him to court and let a judge make a ruling there, or congress can change the law; who knows, perhaps Gene Arganese did this with that very end in mind, to get some cheap publicity out of the deal.
There is no question that he is following the letter of the law and violating of the “spirit” of the law. I myself find this ingenious; but that really isn’t the point is it? The law isn’t about morality, regardless of how much some people try to declare it so. Not following the spirit of a law does not equate to not following the spirit of a person’s moral code, unless that individual person chooses to make it so. It has been my experience that anyone who has had repeated experience with laws, tax or otherwise, will tell you the same thing; the law has nothing to do with morality. The frequency with which they cross paths is subjective and different for every person on the planet. I think the fact that you tie the two together, making judgments about someone’s morality under the guise of what might or might not be legal, says more about you than anything else that you communicated in your posts.