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So-called 'job creators' just killed an entire industry Posted: Jul. 8, 2012 | 2:04 a.m. Well, they did it. Politicians love to bellow these days about how they're doing everything they can to help small businesses create jobs. But with a stroke of the pen on Friday, President Barack Obama put thousands of small "roll-your-own" tobacco shops out of business, throwing tens of thousands more full- and part-time workers on the streets. Maybe they can find work as regulatory bureaucrats, given that the president insists, "The private sector is doing fine." "Hundreds of small tobacco shops that let smokers roll their own cigarettes soon could be out of business under federal legislation classifying them as manufacturers," Mike Esterl reported in The Wall Street Journal on Tuesday. "Such stores have spread rapidly over the past few years by capitalizing on technology and loopholes that let them offer cigarettes often at half the price of ready-made brands." The great Austrian economist Ludwig von Mises, for whom English was a fifth language (not counting Latin or Ukrainian), once asked his student Murray Rothbard to explain this American colloquialism, "loophole." When young Rothbard was done, the old man said, "Ah. So a loophole is when there's something left that they have not yet taxed." A one-paragraph amendment tucked by Sen. Max Baucus, D-Mont., inside the $127 billion federal highway and student loan bill approved by Congress on June 30 expands the definition of a tobacco manufacturer to include businesses that allow customers to use their roll-your-own machines, making them responsible for much higher federal excise taxes - and lots of other requirements with which the little storefront operations can't possibly comply. "Lawmakers passed the amendment after the U.S. Government Accountability Office estimated in April that changes in the market for roll-your-own cigarettes had reduced federal revenue by as much as $492 million between April 2009 and September 2011," The Journal reports. "It also followed heavy lobbying by major cigarette companies such as Altria Group Inc. and the National Association of Convenience Stores." Customers at roll-your-own shops buy - well, bought - loose pipe tobacco (which the purveyors say is free of several chemical additives found in commercial cigarettes) and pour it into ATM-size equipment that can make 200 cigarettes in under 10 minutes. RYO Machines of Ohio, the largest maker, has sold roughly 2,000 of the compressed-air machines to hundreds of shop owners since it began manufacturing them in 2008, the Journal reports. Greedy congressmen, anxious to take advantage of America's tobacco addicts, created the opportunity for these entrepreneurs to sell "roll your own" cigarettes at half price - about $23 per carton as opposed to $46 - when in 2009 they raised federal excise taxes on a carton of butts (weighing less than half a pound) from $3.90 to $10.066, while the tax on a pound of pipe tobacco rose only from $1.0969 to $2.8311. Sonny Wiessen owns 12 of about 18 Southern Nevada "roll your own" stations - one in the Pahrump Nugget casino, one in Laughlin, one in Boulder City and several in Las Vegas. I spoke to Wiessen on Thursday. "Effective 2 o'clock tomorrow (Friday) we're going to be closed down. He's gonna be signing the transportation bill. ... They don't want anyone to know they've gotten paid off by Big Tobacco," Wiessen asserts. "Phillip Morris couldn't win at the local level. We have 31 lawsuits against them around the country. We won in 29." Actually, that lawsuit count proves a little hard to pin down, and Wiessen uses "won" to describe states where the stores were allowed to continue operating under an injunction against government enforcement while the lawsuits proceeded. "So they went about it by the back door. The way the (new) law is written it says any roll-your-own machines - our machines or one you have in your own house - are illegal. When we talked to our attorneys last week, they said ... 'You have to have a federal license, or your fine could be $4,000 a carton, and you could get a year in jail." The manufacturer has told individual franchisees they're on their own if they attempt to operate beyond 5 p.m. July 6, Wiessen says. "It's government at its worst. My kids are going to be OK. I'm gonna lose about a million dollars on this. ... My machines now are basically good as really big boat anchors." Wiessen has other business interests, and he says he knew going in that he faced a long-odds battle against both Big Tobacco and the convenience stores for the right to sell a product already demonized as a health destroyer. The people he feels for, he says, are those of more modest means, who plowed big chunks of their retirement savings into opening stores in recent months. "The stores get very busy. You put in 60K and you get it back in five months. "Now they're gonna be on unemployment. There are 375 people like that right now (in Nevada), that we know of. On top of that you have probably about 10,000 unemployed people (nationwide). I have to go in (to the Pahrump Nugget) tomorrow, take 24 people and give them their last check ... "Plus there's a local guy who ... put in a new (tobacco) warehouse, a guy with 10 guys working in a warehouse. ... This is gonna impact the unemployment numbers. ... "They could have simply grandfathered in any stores that are already open," Wiessen says. "Our attorneys proposed that and told us that was turned down cold. "I can't tell you how many addicted tobacco smokers have come to thank me, said now they can take their families out to dinner. We were saving a two-smoker family $50 a week. ... "The problem is, we have no idea about enforcement. Is the ATF at the door that night to arrest us, or just to issue us a ticket? No one knows. So I would say probably 90 percent of them will close down." They thought they could rely on the law staying the same. It gives some definition to all that loose talk about "uncertainty." Care to invest in a small business, now? Are you sure? |