NCPA - National Center for Policy Analysis


June 25, 2009

Tampa will lose part of its cigar heritage in August when Hav-A-Tampa lays off about 495 employees and closes a factory that has been operating since 1902, says the Tampa Tribune.

Altadis USA, which owns Hav-A-Tampa, tried to keep the plant open by closing it for a week or two at a time and furloughing workers.  Eventually, though, the company couldn't cope with a steep drop in consumer demand brought on by the recession and a large new tax on tobacco products.

Several things conspired to hurt Altadis' sales, says Richard McKenzie, senior vice president of human resources for Altadis, including the recession and the growth of indoor smoking bans:

  • The bans have especially hurt sales in cold-weather states, where it's impractical to smoke a cigar outdoors in the winter.
  • However, the company attributed much of its trouble to the State Children's Health Insurance Program, or SCHIP, a federal program that provides health insurance to low-income children; it's funded, in part, by a new federal tax on cigars and cigarettes.
  • Previously, federal excise taxes on cigars were limited to no more than a nickel, but the tax, which took effect April 1, raises the maximum tax on cigars to about 40 cents.
  • Before the tax increase was passed, the cigar industry warned that consumption of cigars could fall as much as 30 percent in the year after its passage.
  • And these laws are pushing manufacturing overseas; work that had been done in Tampa will not be performed at an Altadis plant in Puerto Rico.

Nevertheless, Altadis will begin laying off workers immediately and will continue until the plant closes. All workers will receive their pay though August and will receive severance packages and job placement assistance, says the Tribune.

Source: Michael Sasso, "Hav-a-Tampa cigars closing Tampa plant," Tampa Tribune, June 23, 2009.

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