An American Nightmare

So you want to be an entrepreneur. Good luck. If your enterprise poses a threat to big business with strong lobbies, you don’t stand a chance. Just ask Phil Accordino of Roll Your Own Tobacco.

If you don’t know what I’m talking about, on Friday July 6, Obama signed into law the $105 billion Highway Bill. The law will effectively destroy the RYO industry. It’s been in the news from The Plain Dealer to The Wall Street Journal to The Huffington Post. It’s produced more outrage than Fast & Furious.

THE AMERICAN DREAM: In 2009, Congress raised the tax on roll-your-own cigarette tobacco from $1.0969/pound to $24.78/pound. Pipe tobacco increased from $1.0969 to $2.8311/pound. Big difference and RYO shops across the country saw an opportunity to save smokers a lot of money while making money for themselves. They switched to pipe tobacco.   

The pipe tobacco didn’t come from the Big Boys, though. In large part, it came from U.S. Flue-Cured Tobacco Growers Inc. The Raleigh, North Carolina-based group is a cooperative of farmers.

Meanwhile, Accordino’s 42 employee company located outside of Youngstown saw an opportunity as well. RYO manufactured and sold rolling machines across the country for about $32,000 a machine. Prior to the Highway Bill, there were about 1,000 RYO shops around the country employing about 5,000 people.

Cigarette smokers saw their costs go from $52/carton down to $23/carton, much needed money that could be used to pay bills or buy food.

All parties were living the American dream. And then the lobbyists came. Altria, parent company of Philip Morris, American Cancer Society and the National Association of Convenience Stores cried foul and demanded RYO be taxed at the higher rates. Caving under pressure – it is an election year and these guys need cash you know – Congress rolled over. Since Congress couldn’t mandate the type of tobacco sold, it found its own loophole. It re-classified the retail outlets as manufacturers. Now RYO not only will have to charge the same as retail stores – about $52 a carton, but stores can no longer operate in zoned retail districts without a variance.

Checkmate!

FOLLOW THE MONEY:  RYOs have denied the U.S. $1.3 billion in potential taxes since 2009. They’ve cut into Convenience Stores profits and there’s no telling what they’ve cost Altria and Liggett the two biggest cigarette manufacturers. But it must be a lot. Altria makes one of every two cigarettes sold in the U.S. Their shipments are down 4%.

So Big Tobacco spent millions of dollars and sent nearly a hundred lobbyists to Capitol Hill over the last few months. They went to their pal Democrat Sen. Max Baucus of MT and cashed in one of their markers. Baucus cleverly inserted the amendment into the Highway Bill… along with $400 million in funding for his state.  

Locally, Reps LaTourette and Fudge, and Sen. Sherrod Brown voted FOR the bill. Sen Rob Portman voted AGAINST the bill. Pres. Obama SIGNED the bill.

Whether you’re a smoker or not, this is heart breaking. It’s a classic case of Big Govt and Big Business teaming up to enrich themselves. Its maliciousness is sickening. Its consequences are devastating. Two competitors destroyed – RYO and the Farmers’ Co-op. An industry ruined. Thousands left unemployed.

It’s an American Nightmare.