Nov 21, 2009 Commentary

A few days ago, the Associated Press published the story Tobacco execs quickly find tax loophole, which was quickly spread by national mainstream media outlets such as Fox, MSNBC and others. Unfortunately, the focus of the story was how "companies repackage roll-your-own brands as pipe tobacco to avoid taxes" which is misleading to say the least. The fact is most of these so-called "repackaged" pipe tobaccos are not identical to their RYO predecessors. These new pipe tobaccos are processed in a wider cut and would probably be considered and labeled as dual-use tobaccos (pipe and roll-your-own cigarette) if it weren't for the current hostile political climate and recent oppressive taxation on RYO cigarette tobacco.

Now, before you scoff at the concept of dual-use tobacco, I'm sure you've heard of Prince Albert in a can, and probably know the old... old prank. Prince Albert tobacco was introduced in 1907 as a dual-use tobacco, the description on the cans read "Crimp Cut Long Burning Pipe and Cigarette Tobacco" as you can see in the advertisement from 1913 at Wikipedia. Consider also the fact that the old Bureau of Alcohol, Tobacco and Firearms procedure for making a distinction between pipe tobacco and roll-your-own cigarette tobacco was "obsoleted in the regulations implementing the Act" (referring to Public Law 111-3 on April 1, 2009). The tobacco manufacturers knew that the TTB government regulatons were being obsoleted and any new regulations would have trouble differentiating between the non-aromatic pipe tobacco and RYO cigarette tobacco beyond the packaging, labeling and "intended use". Therefore, many of the RYO tobacco manufacturers quickly adjusted their production methods in an effort to keep their products affordable months before the new tax law took effect (see the chart).

We would have much rather seen the media focus on the real story which occurred in January when Congress bowed to pressure from Phillip Morris and the Campaign for Tobacco Free Kids and performed a last-minute edit on page 273 of the expanded SCHIP bill - H.R. 2, increasing the existing $1.10 per pound tax to $24.62 per pound (later increased to $24.78 in the Senate). This 2,159% federal tax increase on RYO tobacco was aimed directly at destroying the RYO tobacco industry (Note: taxes on cigarettes and pipe tobacco received 158% increases). Companies specializing in Roll Your Own tobacco, already struggling for survival due to the recession, increasingly hostile anti-smoking campaigns and attempts by the big tobacco to destroy their market share, were suddenly faced with the realization that the retail price of their RYO tobacco products would double overnight solely due to the new tax and be priced out of reach of the majority of their low and fixed income customers.

Since non-aromatic pipe blends are nearly indistinguishable from rolling tobacco except for the way they are cut, RYO tobacco companies switching to pipe blends is not a new idea. As stated above, dual-use tobaccos have existed for over 100 years and cheap bulk pipe tobaccos have existed for many years. More recently, some RYO tobacco manufacturers were investigating the legality of changing over their products from Tax Class J (RYO) to Tax Class L (pipe) prior to 2006 when it appeared likely the first SCHIP extension bill would raise RYO tobacco taxes to $8.89 per pound. (That bill passed Congress twice but was vetoed each time by President Bush.)

There's much more to be said about the misinformation that's being spread by anti-tobacco groups in the mainstream media, I encourage you to read and join the discussion in our RYO Community Forums about this topic and other current anti-tobacco legislation . To wrap-up this commentary, here's a recent video interview with a NYC tobacconist who attempts to answer some of the most basic questions about differentiating pipe from Roll Your Own cigarette tobacco and expresses his views on the absurdity of the upcoming ban against flavored pipe tobacco in NYC.

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The Obama administration struck another blow against the tobacco industry today when the president signed the bill to give the U.S. Food and Drug Administration sweeping power over cigarettes and other tobacco products. The bill was passed by the Senate on June 11 by a vote of 79-17 and includes a ban on flavored tobacco products (except for menthol), and increases restrictions on advertising and in-store displays, adds new health warnings on packages and eliminates the monikers "light" and "low-tar". The legislation was endorsed by Altria Group Inc, which owns Phillip Morris (the nation's largest cigarette maker) and will lead to reduced competition and consumer choices by regulating the small tobacco companies out of existence.

I hope to post an in-depth look at the new FDA tobacco regulations and it's expected impact on the RYO tobacco industry soon. In the meantime, see the ongoing political discssions in the RYO Revolution forums.

Smokers across the country may be caught by surprise when buying cigarettes or other tobacco products today as the nationwide tobacco tax increase takes effect. The 62 cent per pack tax increase on cigarettes has gotten some media coverage but the nearly 2200% tax increase on Roll Your Own (RYO) tobacco and even higher increase on small cigars hasn't received anywhere near the attention we believe it deserves. Some manufacturers and retailers are even taking advantage of the tax increase by raising the prices on $2 pouches of rolling tobacco to over $5. Frankly, this April Fool's joke doesn't strike me as being funny at all.

The expanded SCHIP bill passed by Congress and signed into law by President Obama on Feb 4 Raises the FET (Federal Excise Tax) on Roll Your Own tobacco to $24.78 per pound, a $23.68 INCREASE!

A tobacco farmer receives less than $2 per pound for his tobacco, and retail prices for one pound bags of some brands were previously available (inclusive of the old $1.10/lb FET) for under $10. How is it even legal for the U.S. Government to tax a product at over twice it's retail price? They didn't plant, care and grow the crop, or cut, cure or age it and they certainly didn't process, package and distribute it. Yet somehow our Federal officials believe they are justified to profit off the labors of others at levels that dwarfs the combined profits of every single step in the chain!

Studies show that most cigarette smokers are low to middle class workers, and most people who roll their own cigarettes are the working poor, unemployed or on fixed incomes. It's truly a sad day in our great country's history when our politicians don't think twice about thrusting a 2200% tax increase on the poorest segment of society. If any private sector company suddenly raised their prices by 2000% you can surely bet that there would be lawsuits filed by the states Attorneys General with charges of racketeering and price gouging, but who is going to challenge the Federal Government? It obviously won't be the IPCPR (International Premium Cigar & Pipe Retailers Association) as this letter clearly showed.

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RYOrevolution.com was founded for the sole purpose of educating smokers about the higher quality Roll Your Own (RYO) tobacco alternatives to overtaxed and overpriced pre-made cigarettes. A Federal and State Tobacco Tax table was published for educational purposes only, all political commentary was relegated to sub-sections of the RYO Revolution Discussion Forums.

However, the recent action by Congress has forced me to speak out. I can no longer stand by silently and watch this assault against smokers, particularly those who enjoy Roll Your Own Tobacco. Many who have switched to RYO have done so due to limited incomes coupled with skyrocketing cigarette prices caused by ever increasing state and local taxes.

The expanded SCHIP bill signed into law by President Obama on Feb 4 Will Raise the FET (Federal Excise Tax) on Roll Your Own tobacco to $24.78 per pound. A $23.68 INCREASE effective April 1.

Roll Your Own tobacco sales have had a slow but steady increase over the last decade as cigarette taxes at the Federal, State & Local levels have increased dramatically. The 111th Congress however wants to curtail that trend by increasing the Excise Taxes on all tobacco products to fund not only a renewal, but an Expansion of the 11 year old SCHIP program. Under HR.2, passed by the Congress and signed by President Obama, the FET on Roll Your Own tobacco WILL increase from $1.0969 per pound to $24.78 per pound, a whopping 2,159% Increase!

Cigarette taxes will also see an increase from $0.39 to $1.01 per pack, an increase of 158%. Cigars, pipe tobacco and smokeless tobacco products are also set to increase 158%. We strongly feel that in this time of economic turmoil, Congress should have scaled back their expansion plans to maintain the current SCHIP program at the current tobacco tax rates. Increasing an already highly regressive tax on a low income minority by nearly 2,200% is not only outrageous, but strikes me as a criminal act!

Please visit the SCHIP page for information on the history of the SCHIP legislation which is now set to become law on April 1st.

I've also added a page with an SCHIP Tobacco Tax Table that shows the current Federal Excise Taxes on tobacco products, the rates from the 2007 SCHIP bill (which was vetoed by Bush) and the new rates under Public Law No: 111-3.

You may think that those of us who Roll Our Own cigarettes were somehow scamming the system because we pay lower taxes for a given number of cigarettes, but what about those who home-brew beer & wine, are they next?

As in any hobbyist pursuit, those who choose to make their own cigarettes will usually spend time researching and sampling various tobacco brands and blends, cigarette tubes and/or rolling papers until they find a combination that suits their tastes. There are also startup costs involved, since very few people hand-roll cigarettes these days, that means purchasing one or more machines. Then, if a person decides that it's worth the time investment and hassle to Roll their Own, they usually will purchase storage containers, humidification devices and humidistat's so that they can store their tobacco properly and reduce waste.

In addition to the time it takes to actually make a pack of cigarettes with rolling tobacco, there is also the setup and cleanup time. Then there is the tobacco that is normally thrown out since each 1 lb bag can have an up to an ounce of unusable tobacco powder or 'shake' due to handling. Yes, we save money in the long-run compared to pre-packaged cigarettes, but most people willingly pay more for the convenience of purchasing pre-made packs of cigarettes because they "don't have the time" or "it's too much hassle" to make their own.

What Congress has lost sight of in trying to equalize the tax on RYO tobacco to that of pre-made cigarettes is that you can't just calculate how many cigarettes are potentially in a one pound bag of loose tobacco and use that as a point of comparison any more than you can count up all the material costs used to build a house and say that is what it's market value is when built. You are assigning a Zero Value to the time, labor and equipment investment.

An even better comparison might be pizza. Everyone knows you can make the dough, sauce and add the toppings of your choice in your home kitchen, throw it in the oven and have fresh pizza for a fraction of the price of delivery, but the reality is that millions more pizza's are home delivered than home baked from scratch for one simple reason... it's convenient and people are willing to pay for that convenience.

For more information visit the RYO - SCHIP page where I summarize the history of the SCHIP program, recent congressional action and examine it's impact on the RYO tobacco industry.

Even after the outrageous tax increase on Roll Your Own Tobacco, RYO/MYO will remain significantly cheaper than the overpriced and overtaxed factory made cigarettes. At under $25 for a 6 ounce bag of tobacco and box of tubes, the savings over a carton of cigarettes will remain substantial.

You don't need to limit yourself to the 3 or 4 Rolling Tobacco brands that you find on the shelf at your local supermarket or convenience store. There are over 150 Brands of RYO Tobacco to choose from! Please consult my List of RYO Tobacco Brands to understand the choices available to you.

There are dozens of tobacconist shops with online stores these days. I've compiled a list of the 10 Best Online RYO Shops. These great shops are ready to serve you with many brands and blends of RYO tobacco and discount pricing!

And be sure to visit the RYO Revolution Forums for personal advice or to share your opinions and interact with fellow RYO enthusiasts.

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