Pipe Smokers Intelligencer

 

I encountered a couple of interesting fellows with varied opinions about the future of pipe smoking, tobacco and what we might have coming at us over the horizon. 

Let’s start with Brian Levine, 41, who lives near Charlotte, N.C. 

For a good long while, Levine was director of sales for the old RTDA, which is now International Premium Cigar & Pipe Retailers Association. At the time, he was responsible for exhibitors and exhibitor relations. 

He became a casualtyof “Nancy Pelosi,” he says. Pelosi, of course, is the Iron Lady Speaker of the U.S. House of Representatives. Levine says he was also whipsawed and hung out to dry by the SCHIP and federal excise tax increases, which have downsized many another worker. 

Levine is a walking encyclopedia on tobacco law and legislation. He understands in a fundamental way how the system in Washington works. Plainly, you need mucho cash to make Washington work, and he says that companies like Philip Morris have lots and lots of cash. 

“Philip Morris was the guidance counselor for the FDA,” says Levine with something of a bent smirk. Philip Morris, as you may know, was all for FDA taking over regulatory authority on tobacco. Why? They set the law to work for its company rather than tobacco as an entity. 

“Philip Morris was in ‘protect mode,’” says Levine. 

Today, Levine says, tobacco users are paying for at least three taxes on a retail sale. He calls it “paying a tax on a tax.” 

It is a little complicated, but here is a stab at what he says: 

Let’s say the federal excise tax on a $1 sale of an ounce of tobacco is 20 cents. Now, you have $1.20 on the product. 

States charge each manufacturer a tax for bringing the tobacco into the state. Those taxes vary by state, which in some cases doubles the price of our ounce of tobacco. It has now soared from $1.20 to $2.40 before the ounce ever reaches the customer. 

For the tobacconist to make a profit, he has to add in his share. Then there are the other taxes, such as the SCHIP. Our $1 an ounce has now hit around $4.20 (I will admit here, I am very bad at math, but you get the idea). 

“Every tobacco product in the U.S. is taxed three times,” says Levine. “And the SCHIP is what is called a partially funded mandate. It was estimated to bring in $80 billion based on sales of 2006. 

“But SCHIP is only going to bring in $60 billion because rather than pay more, people quit smoking, refusing to pay the higher taxes.” 

He calls it a diminishing market, and yet lawmakers increased the taxes anyway. 

Full-scale tobacco retail shops have dropped off as well, Levine says. The majority of tax revenues derive from the sale of cigarettes, which have hundreds of thousands of outlets. Pipes and pipe tobacco, cigars and roll-your-own tobacco make up only a couple of percent of the overall tobacco market. 

Yet, these products have either been hit just as hard as the cigarette market, or face an uncertain future. Roll-your-own tobacco jumped from tax revenue of $1.10 per ounce to over $24 per ounce with the new federal excise taxes. 

Marty Pulver, a longtime tobacconist in San Francisco, closed his shop a couple of years ago, and deals now only on the Internet. 

For nearly 20 years, he owned and operated the retail shop Sherlock’s Haven at 275 Battery St. 

Tenants in the building, he says, complained to Boston Properties, who owned the building. Boston Properties refused to renew Pulver’s lease if he allowed his customers to continue to smoke in the store. 

Therefore, he didn’t renew the lease rather than screw his customers. 

During the timehe owned Sherlock’s he was named a Kapnismologist, a Doctor of Pipes, and his store was given the honor of being named one of the 10 Best Tobacco Shops In The World by Forbes Magazine online. 

In June of 2006, the shop’s doors were closed for good and as in Marty’s words: “thereby diminishing the quality of life on this planet no little and quite some.” He now operates an online store selling both new and estate pipes. 

He says it was not the city that closed him down, but the owner of his building. The city wanted him to stay, of course. With the shop closed, of course, the city lost tax revenue. 

And then there is Alan Schwartz of XYZ Direct, LTD in Marietta, Ga., one of the largest distributors in the nation of pipes and tobaccos. 

“Twenty-five years ago, I might have been more worried about the oncoming deluge of taxes and regulations,” he says. 

“But pipes and pipe tobacco are such a small segment of the business.” 

Today, he says, pipe tobacco accounts for about 5-6 million pounds a year in sales. Fifty to 60 years ago, Schwartz says there were pipe stores on nearly every corner and tobacco produced 50-60 million pounds in sales. 

“There were many, many fine tobacco shops. You could buy tobacco in candy stores. My father smoked drug store brands. Today, pipe smoking is a hobby. I just don’t think we are big enough to worry about regulations.” 

“Pipe smoking is the safest way to enjoy tobacco,” he says. “There seems to be this great interest in our health now, but it is the taxes that killed roll-your-own. 

“Still, I just don’t think this will get pipe tobacco and expensive cigars.” 

Tobacco blender Mike McNeil of McClelland Tobacco Co., said he does not view the new FDA regulations and laws right now as a threat. 

“It’s all a tilting at windmills,” he says. 

We shall see.