The Sharps, a farmer family from North Carolina has become famous for the high-quality tobacco they have been growing on their farms for many decades. However, when the federal excise tax on tobacco products was increased by 150 per cents, the Sharp family became frustrated by finding themselves somewhere near bankruptcy.
Peter Sharp, who has been growing tobacco from his early childhood and crops more than million pounds of tobacco on 500 acres every year, admitted that their customers reduced their orders on the threshold of inevitable sales declines. Mr. Sharp also said that they and other farmers would have to fire up to a half of their workers in order to cope with losses.
Following public smoking bans that were imposed in every state across the United States, state cigarette tax increases and constant influence of anti-smoking groups, the sales of cigarettes and other tobacco products were supposed to decline by almost 5 per cent in 2009.
Yet, with the new federal tax on cigarettes that jumped from 39 cents to $1.01 a pack on Wednesday, April 1, industry experts predict up to 10 per cent decline in the sales of cigarettes. Other tobacco products would also suffer.
Sharp said tobacco retailers have cut their orders by one third, and industry tycoons Philip Morris USA and Reynolds American reduced their orders for his tobacco by 5 percent when the bill regarding federal excise tax increase was signed into law. Growers admitted that the tobacco consumption cutbacks would definitely trigger a kind of a domino effect because farmers would have no money to pay salaries, to buy fuel and equipment. Therefore, that would have a huge and very grievous impact on the entire community, affecting many people.
Farmers who had been raising tobacco were always firmly protected by local authorities for many decades, like lawmakers from Michigan and New York rigorously defend their automobile industry and Wall Street, since tobacco growing still is a hugely profitable business. According to the reports, only in the state of North Carolina the tobacco harvest was worth almost $700 million last year.
However, politicians do not take care of ‘Golden Leaf’ anymore. Several years ago Congress abolished the price support and quotas for tobacco, the system that was established during Depression. Last week the Washington lawmakers went even further by providing the Food and Drug Administration with the powers to regulate tobacco products.
North Carolina Assembly members are now debating over increasing the state taxes on cigarettes and tobacco products to unimaginable and incredible $1 per pack. Just four years ago the state cigarette tax was only a nickel.
Kay Hagan, a Democrat Senator from North Carolina was initially against the federal tax hike, stating that her native state would lose almost $40 million in revenue and 3,000 work places. However, she then changed her mind, and voted for the corresponding bill, saying that she decided to support the health of future generations, an excuse, local farmers like the Sharp family simply does not understand.
Jeff Thompson, Sharps’ neighbor railed at the Congress decision, saying that those programs that would benefit many children across the nation should not be paid by a small group of tobacco consumers and growers only. He added that it would be fair if all the tax payers would have paid for that program.
Thus, the tax increase became another huge hit for the farmers who have just recovered from 25 percent sales decline in 2005 when tobacco quotas were abolished. Since 2005, farmers have turned their head to exports and new tobacco-containing products created by tobacco industry moguls.
During these four years tobacco industry has invented new marketing strategies, launching such products as snus, chewing tobacco and other products to the cigarette market. These products were supposed to become cheaper alternatives for cigarettes, but the federal tax hike affected them as well.
Tobacco growers also began selling their harvest to China and other countries, however farmers complain that cheap tobacco from Brazil and African countries restricts the volumes ordered from overseas and therefore could not help them to overcome losses.