20,000 Percent Tax Increase???

[JonEdangerousli]

JonEdangerousli

"I certainly hope your buddy who owns the cigar shop doesn't rely on you for business-critical analysis."

No - he sells large cigars. He relies on me to help him find the source material so he can read it for himself when all the bloggers are trying to tell him his product's taxes are about to go up by 20,000%. Which they most certainly are not going to do - or anywhere near it - which is the entire point.

I'll agree with you on this point. Shrub has already said that he would veto this bill if it ever got to him, so we don't have to worry about it at least until Jan '09.

Continue with the hair splitting while ignoring the thread's titular question;

How is being accurate "hair splitting"? I will note for the record that your response ignores your attempt at misinformation vis a vis your previous post.So far I haven't seen you post anything that refutes the original question, which is the percentage amount of the proposed increase.

20,000% increase? Answer: No.

Correct Answer: Yes.

You may call it "splitting hairs" but you still have provided a grand total of zero evidence to support this claim.

Bad news for cigar smokers and the small business owners who run the shops? Certainly. But that's no reason to spread disinformation. I do appreciate that you read from the source instead of relying on the bloggers - whom I read also. they call out things that warrant a closer look. A valuable service. But they usually have an axe to grind and we should all do our own research - sometimes you discover things aren't necessarily as advertised.

Again, you have done absolutely nothing to disprove the original assertion that the proposed legislation includes a $10 per cigar tax, which is an increase of 20k percent. Please show me how this is not correct. Don't try to dodge the question by talking about bloggers and research. YOU posted the .pdf of the proposal. SHOW me where "the sky is falling crowd" is wrong.

 

[analog_kid]

To get us back on topic here, Rocky has something to say about this tax:

http://www.youtube.com/watch?v=ayi8zWrBwug

 

[JonEdangerousli]

To get us back on topic here, Rocky has something to say about this tax:

http://www.youtube.com/watch?v=ayi8zWrBwug

I think that we've been on topic. One member has disputed the validity of the original statement and to this point has been unable to provide any facts to back up his assertion.

I'm afraid that this video WILL take us off topic as we discuss "the Senate has enacted a law" (from the video).

 

[jazzman]

Rocky Patel is a hero! I'm not bothered by one relatively small misstatement. His passionate explanation of why this tax is a bad idea means much more.

 

[scorpion]

Jonedangerousli

"Again, you have done absolutely nothing to disprove the original assertion that the proposed legislation includes a $10 per cigar tax, which is an increase of 20k percent. "

Ugh. I'm the only guy who linked actual information instead of biased hyperbole.

"Please show me how this is not correct."

Unless I am mistaken, here's what I think you (or them) are doing... you are taking the old tax rate for small cigars and then applying the proposed $10 (maximum - this is actually a limiting measure, not an additive one) maximum on large cigars and mixing the two when in fact they have completely different rates. There is no $10 per proposed for small cigars, i.e., the 20,000 % is not factual and indeed not possible under the proposed measures. My entire point is that exaggeration is not necessary. The tax hike is onerous enough on its own without spreading non-factual information.

I think we're on the same side here guys. I apologize for sounding overly brusque. I did not intend to insult anyone - well, I wrote what I wrote so maybe I did, but I shouldn't have been rude. Like disinformation, being insulting is ultimately a minus in a debate in the long run. In a nutshell.... I'm against the possible tax hike. But having read the proposal I do not think a 20,000 tax hike is possible. If I'm mistaken, I'm mistaken, and I apologize.

I did, however, get a great shave today.

 

[farace]

Just so I'm clear on a couple of things, can someone confirm the following beliefs:

1) The current tax on a large cigar is $0.05.

2) The possible new tax on that same cigar could be $10.

(Which would not be an increase of 20,000%, but only 19,900%, since we're splitting hairs. )

 

[mgoofy24]

This is the way that I read the proposal:

Old Law: Tax 20.79% of manufacturers/importers sale price, but not more than $48.75 per thousand.

This means that if the importer's sale price is $10 per cigar (just to make the math easy), the cigar will be taxed 4.8, rounded to 5 cents per cigar. This is because if the cigars were taxed at a rate of 20.79% per cigar, the tax would be 21 cents, which is more than the cap allows.

New Law: Tax 53.13% of manufactuers/importers sale price, but not more than $10 per cigar.

Same as above, cigar sale price is $10. The tax on this cigar is now going to be $5.30 because this is under the cap of $10 per cigar.

The tax of $10 per cigar is a cap that restrains the tax of 53%. It is not the tax, the tax is 53% not $10 per cigar. Cigars over $20 each (about) will be taxed at $10 per cigar under the proposed changed.

This is where I see the confusion arising from. The $10 per cigar tax is a cap that limits the amount of tax that can be added onto the price of a cigar, not the tax that will be added to each cigar.

So, to answer the question, is this a 20K% markup? The answer is, it depends on the original price of the cigar. A $10 cigar will go from $10.05 to $15.30, increasing the tax from 5 cents to $5.30, which is not a 20K% markup.

A $1 cigar will go from $1.04 (using the 20.79% tax still goes over the limit. 21 cents tax per cigar times 1000 cigars = $210 per thousand, thus we use the cap of $48.75 per thousand) to $1.53, a markup of only 900%, which is much less than the claimed 20,000% markup.

However, a $30 cigar will go from having a tax of 4 cents per cigar to $10 per cigar, which is the (approximate) 20,000% markup that we have seen being tossed around.

Hope that I did this all correctly, had to come back from a few meetings and type this all out in chunks.

 

[JonEdangerousli]

This is the way that I read the proposal:

Old Law: Tax 20.79% of manufacturers/importers sale price, but not more than $48.75 per thousand.

This means that if the importer's sale price is $10 per cigar (just to make the math easy), the cigar will be taxed 4.8, rounded to 5 cents per cigar. This is because if the cigars were taxed at a rate of 20.79% per cigar, the tax would be 21 cents, which is more than the cap allows.

New Law: Tax 53.13% of manufactuers/importers sale price, but not more than $10 per cigar.

Same as above, cigar sale price is $10. The tax on this cigar is now going to be $5.30 because this is under the cap of $10 per cigar.

The tax of $10 per cigar is a cap that restrains the tax of 53%. It is not the tax, the tax is 53% not $10 per cigar. Cigars over $20 each (about) will be taxed at $10 per cigar under the proposed changed.

This is where I see the confusion arising from. The $10 per cigar tax is a cap that limits the amount of tax that can be added onto the price of a cigar, not the tax that will be added to each cigar.

So, to answer the question, is this a 20K% markup? The answer is, it depends on the original price of the cigar. A $10 cigar will go from $10.05 to $15.30, increasing the tax from 5 cents to $5.30, which is not a 20K% markup.

A $1 cigar will go from $1.04 (using the 20.79% tax still goes over the limit. 21 cents tax per cigar times 1000 cigars = $210 per thousand, thus we use the cap of $48.75 per thousand) to $1.53, a markup of only 900%, which is much less than the claimed 20,000% markup.

However, a $30 cigar will go from having a tax of 4 cents per cigar to $10 per cigar, which is the (approximate) 20,000% markup that we have seen being tossed around.

Hope that I did this all correctly, had to come back from a few meetings and type this all out in chunks.

At first glance it appears that you have nailed it.

 

[mgoofy24]

At first glance it appears that you have nailed it.

I knew my degree in Physics would come in handy on this forum!!!

 

[JonEdangerousli]

Just so I'm clear on a couple of things, can someone confirm the following beliefs:

1) The current tax on a large cigar is $0.05.

2) The possible new tax on that same cigar could be $10.

(Which would not be an increase of 20,000%, but only 19,900%, since we're splitting hairs. )

I believe you are correct on both 1 & 2. Rounding error causes the difference in the percentage. I think everyone would agree, however, that there's not too much difference between 19,900% and 20,000%.

My favorite cigar, the Perdomo Edicion De Silvio, sells on cigar.com for $1,299.95 for a box of 50 (I smoke the Torpedo, 6.1 x 54) without shipping. If this tax increase actually happened they would cost me (assuming they passed on the entire increase along) an additional $497.50.

 

[JonEdangerousli]

I knew my degree in Physics would come in handy on this forum!!!

The ability to read and comprehend complex concepts is a wonderful thang... (twang intentional, LOL)

 

[scorpion]

Just so I'm clear on a couple of things, can someone confirm the following beliefs:

1) The current tax on a large cigar is $0.05.

2) The possible new tax on that same cigar could be $10.

(Which would not be an increase of 20,000%, but only 19,900%, since we're splitting hairs. )

With respect, the current tax on a large cigar is not $0.05 - it's something like 20% of the selling price.

 

[scorpion]

This is the way that I read the proposal:

However, a $30 cigar will go from having a tax of 4 cents per cigar to $10 per cigar, which is the (approximate) 20,000% markup that we have seen being tossed around.

Hope that I did this all correctly, had to come back from a few meetings and type this all out in chunks.

Great post. One thing - a $30 small cigar could theoretically get the $10 max... I just don't know if such a thing exists as a $30 small cigar. But the point we're missing is that large cigars never had the 4 cents per cigar tax to begin with. I think the source of all the confusion is from mixing the old tax on smalls with the new tax on bigs if I may oversimplify a bit...

 

[analog_kid]

I think that we've been on topic. One member has disputed the validity of the original statement and to this point has been unable to provide any facts to back up his assertion.

I'm afraid that this video WILL take us off topic as we discuss "the Senate has enacted a law" (from the video).

I could be wrong, I browsed over the last few pages and it began to look like a lefty versus righty war. My mistake. And yes, I did cringe at Rocky's statement about it being a law.

 

[JonEdangerousli]

large cigars never had the 4 cents per cigar tax to begin with.

This is incorrect. The current tax that I pay on my $26.00 cigars is $0.04875, or rounded up to $0.05. The current tax I pay on my $7.00 cigars is the same $0.05. I'd have to smoke cigars that cost less than a dollar to pay a lower tax. WITH THE CURRENT LAW THE MAXIMUM TAX PER CIGAR IS FIVE CENTS!!!!! This is fact. I'm not sure why you're missing this.

I think the source of all the confusion is from mixing the old tax on smalls with the new tax on bigs if I may oversimplify a bit...

So far you are the only person that has posted anything about mixing smalls and larges. There isn't anything to oversimplify. There is no really complex issue here, unless you are intentionally trying to make it so.

 

[mgoofy24]

Great post. One thing - a $30 small cigar could theoretically get the $10 max... I just don't know if such a thing exists as a $30 small cigar. But the point we're missing is that large cigars never had the 4 cents per cigar tax to begin with. I think the source of all the confusion is from mixing the old tax on smalls with the new tax on bigs if I may oversimplify a bit...

I was getting this from the language of the proposed law. Seeing as how I don't buy cigars, I have no idea what the current tax situation is. My only knowledge is from what I read in the pdf file linked earlier. It said:

Current Law
"Cigars weighing more than three pounds per thousand (“large cigars&#8221 are taxed at the rate equal to 20.719 percent of the manufacturer’s or importer’s sales price but not more than $48.75 per thousand;"

This means that there is a cap of $48.75 of tax per thousand large cigars. This calculates out to 4.8 cents per cigar, or rounded to 5 cents per large cigar.

It seems to me like the previous tax law was written with a generous attitude towards the cigar market. I'm saying this because, according to the current tax law, it seems like the 20.719% tax is rarely used because of the tax cap that the law incorporates makes the 20% tax a mute point. Under the current law, the 20% tax would only get used if each large cigar had a importer's sale price of (approx) 25 cents per cigar. If the sale price of each cigar is more that 25 cents, the tax cap of $48.75 comes in and saves the day, capping the tax at roughly 5 cents per large cigar.

Again, this is what I am seeing by reading the pdf file that was linked previously.

Edit: The math (i'm sorry to all those who hate math, I love it )

All of this is rounded for simplification:

Current tax = 20%, a multiplier of 0.2

Current tax cap = $50 per thousand large cigars, or $.05 per large cigar.

Maximun price per cigar that would actually use the 20% tax instead of the tax cap = $.05/0.2 = $.25, or 25 cents per cigar that would actually use the 20% tax.

Any large cigar, currently, that costs 25 cents or less would use the 20% tax. Any large cigar, currently, that costs more than 25 cents would be subject to the ~$50/thousand tax cap because if the 20% tax is used, the tax on 1000 cigars would exceed $50.

Edit #2: Remember, this is all the FEDERAL tax. State sales tax does not count in this math. Yes, it is true that a large cigar that has a importer's price of $10 will most likely cost more than $10.05 because this price only includes the federal tax. Add on a State/City sales tax, and the price will go up (i.e. San Francisco sales tax of 8.5% would increas the price to $10.90: The breakdown: $10 sales price + $0.85 sales tax + $0.05 federal cigar tax).

 

[JonEdangerousli]

I could be wrong, I browsed over the last few pages and it began to look like a lefty versus righty war. My mistake. And yes, I did cringe at Rocky's statement about it being a law.

At least for me the current discussion has nothing to do with left/right. It is about being accurate. I have been guilty in the past of defending a position that was shown to be factually incorrect. It happens to the best of us. It's just like proofreading text. It is impossible to proof your own text. Your mind will constantly tell you it's correct, even when the error is as obvious as the nose on your face to someone else.

The difference between this particular discussion and other politically influenced ones is that the topic of contention is specifically a numerical calculation, therefore it is not subject to the same prisms of personal beliefs. 5 is not greater than 10 regardless of how you FEEL about it.

 

[JonEdangerousli]

I was getting this from the language of the proposed law. Seeing as how I don't buy cigars, I have no idea what the current tax situation is. My only knowledge is from what I read in the pdf file linked earlier. It said:

Current Law
"Cigars weighing more than three pounds per thousand (“large cigars”) are taxed at the rate equal to 20.719 percent of the manufacturer’s or importer’s sales price but not more than $48.75 per thousand;"

This means that there is a cap of $48.75 of tax per thousand large cigars. This calculates out to 4.8 cents per cigar, or rounded to 5 cents per large cigar.

It seems to me like the previous tax law was written with a generous attitude towards the cigar market. I'm saying this because, according to the current tax law, it seems like the 20.719% tax is rarely used because of the tax cap that the law incorporates makes the 20% tax a mute point. Under the current law, the 20% tax would only get used if each large cigar had a importer's sale price of (approx) 25 cents per cigar. If the sale price of each cigar is more that 25 cents, the tax cap of $48.75 comes in and saves the day, capping the tax at roughly 5 cents per large cigar.

Again, this is what I am seeing by reading the pdf file that was linked previously.

I'll hazard a guess here and speculate that the current law was enacted before the cigar boom of the 90's, at some point when the average large cigar cost less than a dollar and a really expensive one was $5.

 

[Lynchmeister]

Great post. One thing - a $30 small cigar could theoretically get the $10 max... I just don't know if such a thing exists as a $30 small cigar. But the point we're missing is that large cigars never had the 4 cents per cigar tax to begin with. I think the source of all the confusion is from mixing the old tax on smalls with the new tax on bigs if I may oversimplify a bit...

*Opening potentially large can of worms*

This could be a possibility when the Cuban trade embargo is lifted.

 

[mgoofy24]

With respect, the current tax on a large cigar is not $0.05 - it's something like 20% of the selling price.

Again, see my post above. The tax cap of (approx) $50 per thousand makes the 20% federal tax a mute point most of the time (unless the price of the large cigar is UNDER 25 cents per), so the cigars are only taxed 5 cents per large cigar.