Premium Cigar Manufacturers, Retailers, Consumers Already Paying VAT-Like Tax in U.S.

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The United States already has a Value Added Tax (VAT) or something very close to it, according to an op-ed piece distributed this week to daily and weekly newspapers across the country. It’s called SCHIP, according to Chris McCalla, legislative director of the association which represents some 2,000 tobacconists nationwide.

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we’re screwed. Paying taxes on taxes and compounding them with more taxes is what it VAT all about. It will be the end of many businesses – not just smoke shops and cigar bars. It will mean the loss of many jobs, and it will create pricing of products that will put them out of the reach of many consumers – including you and me.

The United States already has a Value Added Tax (VAT) or something very close to it, according to an op-ed piece distributed this week to daily and weekly newspapers across the country. It’s called SCHIP, according to Chris McCalla, legislative director of the association which represents some 2,000 tobacconists nationwide.

McCalla was referring to the controversial European VAT which is being considered for application in the United States on top of other sales taxes and that SCHIP is similarly applied. McCalla explained that SCHIP – the State Children’s Health Insurance Program – is the equivalent of a VAT.

“A VAT by any other name is still a VAT and, whether we like it or not (we don’t), the U.S. is already using a VAT-like tax under the guise of SCHIP which was originally enacted by Congress in 1997 and substantially expanded in early 2009,” said McCalla.

“SCHIP is … funded entirely by tobacco taxes. The tobacco industry – including members of (IPCPR) – has always been in favor of healthcare insurance for children, but for its funding to rely solely on the declining base of tobacco federal excise taxes doesn’t make any sense. Healthcare costs go up and tax receipts go down because fewer people can afford the heavily taxed tobacco products or they find ways to avoid paying any tobacco taxes at all. Add a so-called VAT and it makes even less sense.”

He added that VAT is a misnomer. Instead, “it should be called ‘an excuse to collect a hidden federal sales tax on products every step of the way – from providers of parts and components to manufacturers to wholesalers and retailers.’

“Manufacturers of hand-made cigars, for example, pay the tax when they sell their premium cigars and pipe tobaccos to retail tobacconists. Then, in most cases, the retailers pay to their state governments a state excise tax on those same tobacco products except that the state excise tax is on the cost of the product including the full amount of the federal SCHIP tax. That’s what’s happening now: Our members pay state taxes on top of federal taxes, not just one in addition to another. VAT would compound that once again. And, don’t forget state and local sales taxes on top of all that!” he said.

McCalla reminded readers that current sales taxes are only applied when the consumer makes a purchase.

“As it is now, when a manufacturer sells products to a distributor and when the distributor sells his products to a retailer, there is no tax levied or paid, federal or state, except for excise taxes such as on tobacco. State and local sales taxes are levied when the products are sold to the consumer – you and me.

“Remember, a VAT is a hidden federal sales tax which will be imposed on that same product and its component parts, every step of the way – from parts suppliers to manufacturers to wholesalers to distributors to retailers, including when it is sold to you and me when the state and local sales taxes are added on top of it all. It’s a tax on a tax on a tax on a… well, you get the idea.

According to McCalla, either way “we’re screwed. Paying taxes on taxes and compounding them with more taxes is what it VAT all about. It will be the end of many businesses – not just smoke shops and cigar bars. It will mean the loss of many jobs, and it will create pricing of products that will put them out of the reach of many consumers – including you and me.”

McCalla recommended that all U.S. voters – smokers and non-smokers alike – should “become knowledgeable about SCHIP and VAT and, indeed, our nation’s entire system of federal and state taxation and let their elected representatives know how they feel.”

Contact:    Tony Tortorici
        678/493-0313

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