The Cossacks Are At The Wharf

Our Nation’s Proud Smoking Tradition Is at Risk

      My son and I had a dream, the big American dream of owning our own business. Now that we have been in the retail tobacco business in Beavercreek for 26 years, I would like to share the pleasures and difficulties of operating a small ‘politically incorrect’ Ohio business. The pleasures are two: the many friends I have made over the years - good tobacco and friends are synonymous - and working with my son. We have both grown from the relationship.

      And so, ‘The Wharf. ‘

      In 1981 my son and I invested my retirement and his future in the Beaver Square Smoke Shoppe (BSSS). I planned to grow the business with my retirement money. Bad plan. The extant research in 1980 showed that it took a population base of 85,000 people to support a tobacco business. (The number is now eight times that.) In rank of size and revenue, BSSS was last of fourteen Dayton tobacco stores—the last of the Mohicans, so to speak. Within a year, we had to relocate to safeguard our investment, moving from our 700 square foot facility to a 1,200 foot store in what is now Beavercreek Plaza. We changed the name to Tobacco Wharf (TW) because of my interest in things nautical and because tobacco was loaded from wharf to ship in 500 pound hogsheads heading to Europe. Tobacco, remember, was the first major export crop from this country during its formative years. The history of tobacco is part of our national tradition. Hell, tobacco was our first money and GIs went to war with smokes in their arsenal. Ohio farmers sold white burley to keep their families alive. Politics got done in smoke-filled rooms and new Americans were introduced to cigars around a pot-bellied stove. 

      Over the next eight years TW grew and in 1991, when a 1,800 foot space became available right next door, we moved again. ‘Tobacco’ was dropped from the store name to emphasize that we also sold fine gifts and coffee. Besides, ‘tobacco’ was under the gun in the press. By 1996 we had become a major Dayton tobacconist and had outgrown our space. We desired to find a more dynamic location in Beavercreek, a store more convenient for our friends living outside of Beavercreek. The Mall at Fairfield Commons arena – three miles north of our then location - beckoned and we relocated to the 4,200 square foot facility we currently occupy - north of the Mall and west of Sam’s Club. We became the number one tobacconist in the Dayton area. Over the past 26 years, our customers made The Wharf a local tradition - everyone is always welcome and the smoking lamp always lit. Today, tobacco executives rank us among the five largest tobacconists in the country.

      It has been an uphill battle all the way, sometimes straight uphill, because of federal and state government regulations. There seems to be an ongoing pogrom against tobacco. Flash back to the movie ‘Fiddler on the Roof,’ to the wedding scene. The village is joyous, there is food, music, and dancing - until the Cossacks ride into its midst to extract tribute. Such was the price paid by the village for being different from the general population.

      In a similar fashion, the Cossacks ride into our industry, extract tribute, and then ride back to report back to their Tsar “Mission Accomplished! Look, we have protected our adults against themselves and saved the children.” Government loves tobacco because of the huge tax revenues; and yet it sucks up to the groups who consider tobacco the greatest evil since Attila. Their purpose is to protect people from themselves and save the children, right? Quite the delicate balancing act, but politicians excel at it! The spoils replenish the empty pork-barrels; children and health are forgotten until the next raid.

      The first big assault on Ohio smokers came in 1992 when the state imposed a 17 percent wholesale tax on all tobacco goods other than cigarettes. This OTP (Other Tobacco Products) tax translated into an 8% increase in the cost to smokers. Unlike sales taxes, the OTP tax is due upfront - my son and I pay the tax and hope like hell to sell every single unit just to recover our outlay. Contrast this to sales tax which is payable by the consumer at time of purchase, collected by the retailer, and then passed on to the state. The OTP tax is a burden on the retailer, one that is not recovered unless all applicable goods are sold. And when does that ever happen? Ohio doesn’t care. $35 to $40 million per year goes to Ohio’s general fund and that’s what they care about.

      Several years ago, Ohio bumped the excise tax on a pack of cigarettes from fifty-five cents to $1.10. Some bump! Cigarettes soared fifty-five cent a pack overnight. What’s more, the State shook us down for a floor tax too, payable within 30 days. Floor tax is an additional levy due on applicable inventories in stock at the time the new tax law is signed. Computation is simple - multiply the store cigarette inventory by the increase in tax - $0.55 at that time - then cough up the hundreds of additional tax dollars due within 30 days. And just when you thought the Sopranos were fictional.

      See that cloud of dust on the horizon? They’re back!!! The Cossacks are again raiding our industry, this time for the largest tribute in history. Some four thousand American tobacconists are in jeopardy of losing their businesses. Smokers are not just a minority, they’re aliens! And tribute must be extracted from their suppliers. And with every raid, the village dwindles. Soon it will belong to the ages. Here’s why!

      Our liberal, do-gooder politicians are great marketers! They have sold the public on the notion that tobacco taxes must provide for the health of children as it’s an easier sell than an income tax increase. The politicos love kids, but they love reelection even more. Consider this profile in courage. The SCHIP (State-Children Health Insurance Program) bill is now before the US Congress for renewal. This program originated in 1995 during the Clinton administration and expires 30 September 2007. The original program provided health care insurance to children whose family income was less than $19,200. The Congress jiggered the 1995 SCHIP so that a qualifying household’s income could be $39,000 and children up to age of 25 would be covered whether they lived at home or not. But why stop there? Money is no object - that’s why we have tobacconists. Our 110th Congress has seen fit to not only extend this act, but have passed legislation to provide benefits to an extra 6.8 million children and to raise the qualifying household income to $82,000. To fund this program – you guessed it – they are asking $50 billion from smokers over the next five years.

      The health of children is important, so important that Congress ought to ask for increased income tax to finance SCHIP. That would take Congressional guts. But wait, said the Congress, let’s put the entire funding burden squarely on the back of smokers. They don’t have the votes to stop us. Oh sure, this act will deliver a crippling blow to suppliers and smokers, but we socked it to them before and they’re still standing. And if the revenue is not there, we’ll come up with some other suckers to carry the weight. How about folks who drive trucks and SUVs? Tempting.

      That’s what Congress thinks and here’s what we think. If the American people want a form of National Health Care in the form of SCHIP, then Congress should raise funds to support such a cause over a broad spectrum of the population. It should not be put upon the backs of less than 20% of the population. 

      Okay, so when does Congress intend to shake down smokers for $50 Billion? As soon as possible. Both the US Senate and the House currently have passed different bills before the summer break. In September, the differences will be hammered out and a single bill voted upon. President Bush has vowed to veto the bill for the same reasons I stated earlier. His veto can be defeated by a 2/3 majority of Congress. Both Chambers agree on the same increase in cigarette taxes with some differences in OTP and floor taxes. Federal taxes on cigarettes will be increased from $0.39 to $1.00, an increase of $0.61. And don’t forget the payment of the floor tax because Congress didn’t. The cigarette tax alone will account for about 97% of the $50 billion burden. The remaining 3% will come from raising the Federal OTP tax on all other tobacco products and related goods – cigarette tubes, rolling papers, smokeless tobacco (they didn’t include lighters. Zippo must have a better lobby than tobacco companies). The American press has failed to mention the devastation the OTP and floor tax will have on the industry. They have only focused on the 97% revenue that will be generated by the cigarette tax increase. The impact on the increase in cost for cigars has gone unreported.

      Let’s focus on what this means to cigar smokers. The current OTP tax on large cigars is $0.10—one thin dime. The Senate version will increase this tax to 53% of the manufacture’s cost; the House by 33%. The Senate version will extract the same percentage as a floor tax from tobacconists – read, The Wharf. The House bill asks for no floor tax.

      Bottom line: the Senate version will increase the cost of a $5.00 Wharf cigar to $8.85; the House version from $5.00 to $7.85. Senator Voinovich (R) voted No; Brown (D) Yes. In the House: Boehner, Hobson, Jordan, Schmidt, and Turner (all Rep.) voted No. The task facing both Chambers after the summer recess is to agree on a common bill.

      Oh, but Congress knows how to compromise! Both houses have agreed that the cigarette tax, a $0.61 increase, is cast in concrete. They most likely will settle on a 44% OTP tax raising a $5.00 Wharf cigar to $8.35—who said they weren’t reasonable people? How they might compromise on OTP floor tax is anyone’s guess! But keep in mind, any floor tax is the death knell of the retail tobacco business. That cost will never be recovered by the tobacconist. The hurricane lashing our village just may sweep The Wharf out to sea.

      Oh yes, President Bush has vowed to veto any SCHIP legislation and it may just stick unless Congress can muster the votes to override his veto. Stay tuned for the next episode in this recurring drama because the Cossacks will raid our village again. They can’t afford not to! But they might come to their senses if you voice your opinion now! We still have a few weeks before summer recess is over. Act now to preserve an American tradition - your right to smoke. You can make a difference.

GO TO:

http://rtda.org/legislation.html

TO VOICE YOUR OPINION TO CONGRESS.

Simply copy & paste the above address into your web browser to go to the Retail Tobacco Dealers Association (RTDA). After you enter your Zip code, a list of Congress members will appear applicable to your Zip code. Voting instructions are straightforward. The RTDA site is simply a conduit to assist you to easily register your vote. Any information you enter is purged after your vote is submitted. Vote now while the privilege to vote is still available to you.

**Acknowledgement is given to Andy Foley, one of the Wharf RATS (Respectable And Tolerant Smoker)©, for reviewing this article.