Written by Puff Staff

Wednesday, 21 July 2010

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Utah's Taxes Show Devastating Effects


Retailers in the Empire State are not the only ones being hurt by exorbitant tax rates. Effective July 1, the state of Utah recently raised taxes to 86 percent, a far cry from the original rate of 35 percent. Like New York, Utah's state officials claimed that the tax hike was necessary to aid with state budget troubles in the neighborhood of $40 million. Besides the economic help, they also cited the negative health effects caused by tobacco as another reason for the tax rate, as it would help act as a deterrent to would-be smokers.

One would expect that such news would devastate many up and coming retailers, but the fact that it destroyed one of Utah's oldest and most prominent shops shows just how damaging the new taxes are. Jeanie's Smoke Shop, which reigned as the oldest shop of its kind in Utah, was forced to close its doors on June 30. Jeanie's opened up over 70 years ago and was seen as a prime stop for cigar fans in the state's capital of Salt Lake City. The shop's owner, Gary Klc, decided to shut down operations on June 30 to avoid paying a mandatory floor tax on his current inventory. The tax would have been enforced on July 1, and it would have cost Klc nearly $125,000.

Klc polled many of his customers as to their intentions once the higher taxes became live. Many relayed that they would likely seek cheaper alternatives. The prospects of a high floor tax and declining sales led to Klc's tough, yet final decision to close Jeanie's down. He held a final sale to clear as much of his inventory as possible, and had to release four of his employees.

Just as was the case in New York, these ridiculously high state taxes are making it extremely difficult for cigar shop owners to survive. Utah's claims of negative health effects as a reason for the increase seem like a weak excuse to use the cigar industry as a scapegoat once again. If they really wanted increased tax revenue to help with their budget problems, they should have made the rate somewhat reasonable so that businesses could continue to operate. Instead, they made them so high that owners and customers will go elsewhere, and the budget problems will likely remain unresolved.

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