Morales' bill would increase the tax on a single cigar to 76 percent of its wholesale vale. That comes to $3.04 on a $4 cigar.
In 2016, Matt Monte's business in Albuquerque paid more than $300,000 in state and local taxes. But if State Sen. Howie Morales, a Democrat from Silver City, gets his way, Monte's business won't be paying any taxes to the city of Albuquerque, Bernalillo County or the state.
Because Morales seems hell-bent on driving Monte's business, and others like it in the state, out of business. And if a business is out of business, well, it won't pay any taxes to any government entity, and Morales and crowd will have to propose taxing the air we breathe in order to raise more money for state government.
Monte owns a cigar shop, Monte's Cigar Shop at 3633 San Mateo NE., which his family has run since 1976. It is an Albuquerque institution, and it's customers include pretty much everyone - politicians, mayors, governors, lawyers, truck drivers, and even news reporters.
But Monte, 35, said he'll have to close the shop and move it to Texas, or some other business-friendly state, if a bill Morales has introduced in the Senate passes and is signed by the governor. It's Senate Bill 25 and it would impose a 76 percent tax on each and every cigar that Monte's and other cigar shops in the city and state sell. The current cigar tax, which was imposed in 2008, is 25 percent on each cigar.
Morales' bill, which should really be called the New Mexico Small Business Economic Suicide Act, would also boost the tax on a pack of cigarettes by $1.50 a pack. If it passes, the state tax on a pack of cigarettes would jump from the current $1.66 a pack to $3.16 a pack.
(Photo: Matt Monte says that if passed, a bill to increase the state taxes on tobacco products would force him to close his cigar shop and move it to Texas.)
Morales' bill could also be called the Let's Tax Everything We haven't Already Taxed Act because it expands the definition of “tobacco product” to include:
- A product that is made of or derived from tobacco or nicotine and that is intended for human consumption, whether smoked, heated, chewed, absorbed, dissolved, inhaled, snorted, sniffed, or ingested by any other means;
- An electronic device that delivers nicotine or other substances to the person
inhaling from the device;
- A component, part, or accessory of a tobacco product; and,
- A cigar, chewing tobacco, pipe tobacco, snuff, electronic cigarette, electronic cigar, or electronic pipe.
In other words, Morales' bill is just another attempt to make us nothing but cows to be milked of our money by the state.
So let's do the math when it comes to the premium cigars that Monte's sells.
Currently, a cigar that costs Monte's $4 wholesale, is hit with a $1 (25 percent) state tobacco tax. You have to add on to that cigar the cost of keeping the business open, other taxes, and the cost of actually paying employees.
Under Morales' bill, the tax on that $4 wholesale cigar would jump to $3.04. That's right, the tax on a $4 cigar would be $3.04, and that is tax insanity. And to add to the insanity, New Mexico, because of its high cigarette taxes, is third in the nation when it comes to cigarettes being smuggled in from low-tax states, according to the Tax Foundation.
Monte got into the family business about 10 years ago and just after the geniuses in the Legislature imposed a 25 percent tax on cigars. Between 2008 and 2102, Monte's business fell 23 percent and it hasn't recovered, and it was all due to the 25 percent tax, Monte said. And if the 76 percent tax rate were to be imposed, his business would be destroyed because cigar smokers would order from online retailers, or simply smuggle cigars in from other, low-tax states.
Texas, for instance, has a one-cent tax on every cigar, Monte said. And Arizona has much lower taxes as well.
And if Monte's closes, the state would lose money. In 2016, Monte's paid $195,000 in tobacco taxes, Monte said.
“Would you pay 76 percent tax on anything?” Monte said. “They (customers) aren't going it pay that either. They're going to go online or to the reservations. San Diego lost 13 cigar stores alone when California raised it tax on cigars to almost the same amount.
“So imagine what'll happen in a state of two million people that's surrounded by reservations, and Texas, where the tax is only a penny a stick, and Arizona and Nevada where it is less than 10 percent.
“This will absolutely put us out of business,” Monte added. “We'd pack everything up and go if this passes. I mean the governor isn't going to sign it, but I'll have to prepare for 2019 [when there will most likely be a Democratic governor in office], and if it does pass, then, yeah, I'm out of here. I can't provide for a family and do business here."
Morales, who is an educator, wants the extra $85 million a year he thinks the increased taxes will raise to go to the state's public schools. That's somewhat of a meaningless gesture because the state already funds public schools to the tune of $2.7 billion a year, or 44.3 percent of this year's $6.1 billion general fund budget.
Even though he's an educator, Morales doesn't seem to grasp some basic economic concepts. An analysis of Morales' bill notes that when tobacco taxes go up, sales go down and tax revenues decrease.
Or as Monte put it: “How do you increase revenue for education while eliminating businesses?”
“I mean how many people does the state have to lose?” Monte continued. “We're losing the best and the brightest because they are smart enough to go to other states for better opportunity. I'll be the next. If this thing passes, I already have a place in Georgetown, Texas, picked out. I won't have to pay property taxes for 10 years because they want me there.”
If Morales' bill passes, the money it raises should go to fund a special course that all of New Mexico's precious school children should be required to take.
And that course should be called, “How to Purposely and Thoroughly Destroy Businesses in New Mexico, By Howie C. Morales.”