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  1. #1
    Good Enough avhevhmashdlr's Avatar
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    03.10.14 @ 08:22 PM
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    Default Tobacco execs quickly find tax loophole

    http://news.yahoo.com/s/ap/20091117/...o_tax_loophole

    Tobacco execs quickly find tax loophole



    WASHINGTON – When President Barack Obama signed a law expanding children's health insurance this spring, he slapped tobacco companies with huge tax increases to pay for it.

    It didn't take long for the companies to find a multimillion-dollar loophole.

    As soon as the new law took effect, raising taxes on roll-your-own cigarettes from $1.10 to $24.78 a pound, companies adapted. They all but shut down their roll-your-own brands and reinvented them under a less-restricted, less-taxed category: pipe tobacco. It's still destined to be rolled and smoked, but it's taxed at barely a tenth the rate, $2.83 per pound.

    Pipe tobacco is normally too coarse and moist to roll into a cigarette, but nothing says it has to be. In fact, the Obama administration says the only distinction between pipe tobacco and roll-your-own tobacco is how it's labeled, effectively giving tobacco marketing executives an opportunity to shape their own tax rate.

    Nearly overnight, roll-your-own brands like Criss Cross and Farmers Gold came off the shelves, replaced by pipe tobacco with the same names. The cuts may be slightly different, but they're suitable for rolling. Knowing this, retailers steer customers to the new products, sometimes with a wink and a nod, sometimes with outright advertising.

    "They tried to make a product within the elements of the law that they could, in fact, market as pipe tobacco," said Scott Bendett, owner of Habana Premium Cigar Shoppe in Albany, N.Y., which advertises the new pipe tobacco for hand-rolled cigarettes.

    Tobacco companies say they're just trying to find a legal way to stay afloat after being saddled with an enormous tax increase. But both the Obama administration and some in Congress say they'll try to come up with a distinction between the tobacco types, closing a loophole that could cost taxpayers hundreds of millions of dollars year.

    "If the companies won't do what is right, then we will," said Sen. Frank Lautenberg, D-N.J., a reliably anti-tobacco voice in Congress.

    Because the small, independent companies in the roll-your-own market are often overshadowed by the huge, publicly held cigarette companies, the sudden shift toward pipe tobacco caught researchers by surprise.

    Daniel Morris, who tracks tobacco production data at the Oregon Department of Health, thought he had made a mistake when he saw April's figures. Pipe tobacco production had more than doubled in a single month. After years of producing about 270,000 pounds per month, companies put more than 566,000 pounds of pipe tobacco on the market in April.

    Morris called the federal Alcohol and Tobacco Tax and Trade Bureau, which collects the data.

    There was no mistake.

    Over the next several months, the numbers climbed higher. In August, the most recent data available, pipe tobacco reached 1.7 million pounds, enough to roll more than 42 million packs of cigarettes.

    The huge spike in production corresponded with a tremendous drop in the roll-your-own industry. Companies produced 660,000 pounds in August, down from an average of 1.5 million pounds before the tax.

    "It really shows how the industry is able to respond to changes in the tax environment," Morris said.

    Anti-tobacco groups say it's deception, and not just because of the taxes. While flavored cigarettes are now banned in an effort to reduce the appeal of smoking to children, no such ban applies to pipe tobacco, allowing companies to sell black cherry, vanilla and other varieties.

    "This is a direct challenge to the federal government," said Matthew Myers, president of the Campaign for Tobacco Free Kids.

    Art Resnick, a spokesman for the Tax and Trade Bureau, said there's no way to know how many companies have reinvented their brands as pipe tobacco, or whether the new offerings are just cigarette tobacco with pipes on the labels.

    The tax implications could be huge. As much as $32 million a month could be lost in taxes if the sudden spike in pipe tobacco is just cigarette tobacco in disguise.

    Companies say they're just trying to survive within the law. People buy roll-your-own tobacco because it's cheap, so when Washington raised taxes 2,000 percent, pipe tobacco became the affordable option. For some, it was the only option.

    "It allowed companies to stay in business, enough to keep paying the light bills," said Cheryl Turner, vice president of M&R Holdings, a small company in Pink Hill, N.C., that manufactures Farmers Gold.

    After the tax increase, the company cut staff from about 40 employees to about a dozen.

    Kevin Altman, who represents a handful of small companies with the Council of Independent Tobacco Manufacturers of America, acknowledged that some companies were exploiting the loophole, packaging cigarette tobacco and marketing it as pipe tobacco.

    "What are you going to do? You're trying to save the company," Altman said. "And what they're doing ... , as far as I can tell, is within the limits of the law."

    Still, Altman said his companies want the government to make the definition clearer. The ambiguity hurts those companies that didn't make the marketing switch and must sell their tobacco at higher prices.

    "Many times our government passes things without first taking an extra few days to say, 'What are the unintended consequences?'" Altman said. "That's what happened here."
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  2. #2
    Atomic Punk lovemachine97(Version 2)'s Avatar
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    There's a shock, unintended consequences from a governmental policy. That never happens.

  3. #3
    carpe damn diem billy007's Avatar
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    makes me wonder when was the last time I saw someone smoking a pipe? Been a looooonnnnngggg time, I'll tell you that!

  4. #4
    Hot For Teacher Kula's Avatar
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    02.16.16 @ 12:09 PM
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    been rolling pipe tobacco for a few months now. Slightly different flavor - MUCH lower price. The tax was a steaming pile of cow shit anyway, so I don't feel bad about the loophole. Who the hell increases taxes 2300%? F@cking pricks!

    smoke 'em if u got 'em...while u can afford 'em...

  5. #5
    Atomic Punk
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    07.24.11 @ 04:36 PM
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    been thinking 'bout rolling my own and about moving to a pipe for a while now. I've seen those little contraptions that stick the tobacco in the tubes and attach a filter and all that jazz.

    as for the tax deal...I say good for the manufacturers though I'm sure it's only a matter of time before congress amends their little tax law. I've said it many times before: Smokers should not be held any more responsible for funding programs than anyone else and for far too long they have been. From education to children's health care, smokers (and drinkers for that matter) have been flipping much more than their fair share of the bill.
    Stay out of it, dude.


    I am Van Halen.

  6. #6
    Sinner's Swing! Wickett's Avatar
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    07.19.17 @ 06:30 AM
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    Default

    Good for the tobacco companies. This was an excessive tax to charge Children's Healthcare to an unrelated group. And this isn't just limited to nicotine addicts. Cigar and Pipe smokers were tagged as well (57% tax on each cigar, capped at $.40).

    Another unintended result? That's right, putting legitimate, legal cigar factories out of business stateside, costing jobs for employees that were already paying for health insurance benefits for their kids.

    http://tampabay.bizjournals.com/tamp...2/daily33.html


    Want to pay for CHIP? Tax each box of diapers 20 cents. Tax a box of kids cereal 10 cents. Just an idea. There's better ways what what was passed.

    Good God.. I'm starting to sound like a Republican..
    Don't drink the Jim Jones punch. They're called theToxic Twins for a reason...

  7. #7
    Eruption
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    10.05.17 @ 11:44 AM
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    Default

    Typical government move, they want something they tax the hell out of some industry for the money. Why not find more fiscal ways of paying for things and cutting the ridiculous spending that the government does.
    Your favorite band sucks.

  8. #8
    Baluchitherium
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    12.06.17 @ 01:26 PM
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    Default

    Quote Originally Posted by Wickett View Post
    Want to pay for CHIP? Tax each box of diapers 20 cents. Tax a box of kids cereal 10 cents. Just an idea. There's better ways what what was passed.

    Good God.. I'm starting to sound like a Republican..
    Nah... A Republican would tell you to make cuts in your spending. In theory anyway.

    That's actually not a bad idea on the cereal. As long as we're taking the "sin tax" approach, maybe have an extra tax on cereals above a set sugar percentage.

    Although I would fall into the camp that prefers spending cuts.
    Posted from yo' mama's house.


  9. #9
    Atomic Punk
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    07.24.11 @ 04:36 PM
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    ah but that would be seen as "an attack on American Families!" Can't you just hear the bombastic speeches and sound bites from bastard politicians and asshole radio talk show and cable "hosts?"

    Can't you just hear the indigination? We're out here working hard to provide for our children, we already don't make enough to give them healthcare and now their diapers and food just got more expensive?! What are we supposed to do?!?
    Stay out of it, dude.


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  10. #10
    Atomic Punk Viking's Avatar
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    11.02.17 @ 09:45 PM
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    Default

    So, here's my question: Where is the government going to get the money that they thought they were going to raise by the tax increase?

    You know damn well, the bean counters were counting on a certain dollar amount from the tax increase, and now that money won't be there. I see another tax hike in the near future.
    "Viking - last to sleep, first to rise, last to leave, that's how the Nords of old rocked the house." ~ timmac in the 'Texas Linkers' thread talking about yours truly. :-)

  11. #11
    Atomic Punk
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    07.24.11 @ 04:36 PM
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    Quote Originally Posted by Viking View Post
    So, here's my question: Where is the government going to get the money that they thought they were going to raise by the tax increase?

    You know damn well, the bean counters were counting on a certain dollar amount from the tax increase, and now that money won't be there. I see another tax hike in the near future.
    yeah I always wonder the same thing when I hear politicians talking about raising cigarette tax or any SIN tax really...same thing with speeding and traffic tickets. What happens if people DIDN'T speed or change lanes without signaling etc? Here in Houston the traffic ticket revenue is part of the city budget. What happens if the bit about curbing cigarette smoking that politicians say out of one side of their face actually came to pass? Then what?
    Stay out of it, dude.


    I am Van Halen.

  12. #12
    Atomic Punk lovemachine97(Version 2)'s Avatar
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    Business always find ways to get around taxes. So do the rich. Obama may want to tax them at over 40%, but they won't really pay it. Much like tobacco figured out a way around, most companies and individuals pay a lot of money to people to help them figure out ways not to pay their taxes. The taxes they do pay get passed along to the middle class via higher prices.

    Ugh....spend, tax, spend, tax, spend, tax, spend, tax, spend, tax, spend, tax, spend, tax....it's insane!

    Stop spending. Jesus. Maybe people will finally get that these people just throw our money around as if it's theirs and they let us spend a percentage of it.

    As far as sin taxes, there are many, such as NYC charging $4.25 a pack for cigarettes alone. Washington has a tax on liquor that's $26 per gallon. That's $5 per 750 mL bottle. Illinois charges 6.25% on soda and candy....

    So where does the money come from after this? From us, of course. More taxes, more handouts, more bailouts. GMAC wants a 3rd bailout of $5,000,000,000. They'll get it.

    During the fiscal year 2008, the federal government collected $2,500,000,000,000 of our money. They outspent that by 18%, or $455,000,000,000. Whatever they want, they take, and we give it to them.

    As Economist Walter Williams said, "Politicians are worse than thieves. At least when thieves take your money, they don't expect you to thank them for it."

    What do you guys think about a consumption tax? As an Independent who leans Libertarian, it is the only agreement I have been able to get on taxation when talking to my Republican and Democratic friends. Toss out the tax code, which creates all these loopholes in its monstrosity, give me my whole paycheck, and create a consumption tax. Any takers?

  13. #13
    Atomic Punk
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    Quote Originally Posted by lovemachine97(Version 2) View Post
    Business always find ways to get around taxes. So do the rich. Obama may want to tax them at over 40%, but they won't really pay it. Much like tobacco figured out a way around, most companies and individuals pay a lot of money to people to help them figure out ways not to pay their taxes. The taxes they do pay get passed along to the middle class via higher prices.

    Ugh....spend, tax, spend, tax, spend, tax, spend, tax, spend, tax, spend, tax, spend, tax....it's insane!

    Stop spending. Jesus. Maybe people will finally get that these people just throw our money around as if it's theirs and they let us spend a percentage of it.

    As far as sin taxes, there are many, such as NYC charging $4.25 a pack for cigarettes alone. Washington has a tax on liquor that's $26 per gallon. That's $5 per 750 mL bottle. Illinois charges 6.25% on soda and candy....

    So where does the money come from after this? From us, of course. More taxes, more handouts, more bailouts. GMAC wants a 3rd bailout of $5,000,000,000. They'll get it.

    During the fiscal year 2008, the federal government collected $2,500,000,000,000 of our money. They outspent that by 18%, or $455,000,000,000. Whatever they want, they take, and we give it to them.

    As Economist Walter Williams said, "Politicians are worse than thieves. At least when thieves take your money, they don't expect you to thank them for it."

    What do you guys think about a consumption tax? As an Independent who leans Libertarian, it is the only agreement I have been able to get on taxation when talking to my Republican and Democratic friends. Toss out the tax code, which creates all these loopholes in its monstrosity, give me my whole paycheck, and create a consumption tax. Any takers?
    yep...brokenland would have a consumption tax.
    Stay out of it, dude.


    I am Van Halen.

  14. #14
    carpe damn diem billy007's Avatar
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    doesn't matter how you collect taxes, really, until the problem of how the money is spent is fixed. You could come up with the fairest tax code in the world where every citizen pays their fair share and no one complains about it, but as long as the politicians keep wasting those dollars on pet projects or over spending on basic items, they're always going to need more, more, more.

  15. #15
    Atomic Punk
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    Quote Originally Posted by billy007 View Post
    doesn't matter how you collect taxes, really, until the problem of how the money is spent is fixed. You could come up with the fairest tax code in the world where every citizen pays their fair share and no one complains about it, but as long as the politicians keep wasting those dollars on pet projects or over spending on basic items, they're always going to need more, more, more.
    yep.
    Stay out of it, dude.


    I am Van Halen.

 

 

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