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Now we're going to hear a little bit about how the government plans to pay for some of the new spending. A big increase in the Federal tobacco tax arrives on April 1st. Congress plans to use the money to expand a children's health insurance program. Cigarette taxes go higher, and the tax on cigars is going from a nickel to 40 cents. To gauge the impact, NPR's Debbie Elliott takes us to America's cigar city: Tampa, Florida.

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DEBBIE ELLIOTT: You can still find Cuban immigrants hand rolling cigars in the storefronts of Ybor City, the section of Tampa named after a Havana cigar manufacturer.

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ELLIOTT: Here at La Herencia de Cuba, Roberto Ramirez is rolling a tobacco leaf wrapper around a torpedo-shaped cigar. His fingers are stained from more than half a century of cigar-making. Ramirez and his son, Abraham, run this Tampa smoke shop. They're also wholesalers, and are bracing for the tax hike. They support a higher tax on imports, but say 40 cents is too much for cigars made in the U.S.

Mr. ROBERTO RAMIREZ (Cigar Maker): (Through translator) What they're doing here, to the industry here, is going to kill us, because everything here is too expensive, you know? Tobacco, our rent, payroll - everything is very high.

ELLIOTT: Tampa was once called the cigar capital of the world. The city's proximity to Havana and its humid climate made it ideal for producing cigars. Cigar City Magazine editor Manny Leto says the industry was a force here from the late 1800s until World War II.

Mr. MANNY LETO (Editor, Cigar City Magazine): You know, at its peak in the 1920s, there were more or less 100 to 200 cigar factories operating in Tampa at any one time.

ELLIOTT: But after a series of setbacks, from the rise of cigarettes to the Cuban embargo, now only a few remain.

Mr. ERIC NEWMAN (President, J.C. Newman Cigar): We're going to go to the cigar floor of our factory.

ELLIOTT: At the three-story, red brick J.C. Newman Cigar factory, President Eric Newman takes me on a tour of the company his grandfather started in 1895. On the cigar floor, dozens of workers - most of them middle-aged women -operate machines that churn out 13 cigars a minute.

Mr. NEWMAN: In here, we'll take a tobacco leaf, lay it out on the die, which cuts out a pattern like a cookie cutter, gets picked up and laid on the cigar.

ELLIOTT: Newman says the higher tax will increase his prices by a third and drive down business.

Mr. NEWMAN: This is our life. Shame on Congress. Shame on our government for trying to put us out of business. In the days that they are offering $25 billion bailouts, we don't want a $.25 bailout. We just want the government to leave us alone so we can run our business the same way we've been doing it for 114 years.

ELLIOTT: Newman, chairman of the Cigar Association of America, says more than two-thirds of the cigars sold in the U.S. are either made or imported through Florida. He calls it a homegrown industry, just like citrus.

That made supporting the tax hike a difficult vote for Tampa Democrat Kathy Castor.

Representative KATHY CASTOR (Democrat, Florida): I was very concerned when it started off in the United States Senate at $10, and then $5 per cigar.

ELLIOTT: She says the $.40 compromise is worth it to expand children's health coverage.

Rep. CASTOR: Eventually, it worked out because the overriding issue and concern is that children can see the doctor and get the health care that they need.

ELLIOTT: But retailers say the tax increase could not have come at a worse time.

Ms. CATHY SANCHEZ (Metropolitan Cigars): This is going to be a full-body cigar. Any…

ELLIOTT: Cathy Sanchez runs Metropolitan Cigars in Ybor City.

Ms. SANCHEZ: It's going to put a strain, too, because we are feeling the economic times right now. You know, we have seen a little bit drop in our business because of the economy.

ELLIOTT: Customer Pat Collier of Zephyrhills, Florida calls it a punitive tax aimed at smokers.

Ms. PAT COLLIER: You know, this is really just like the tea tax…

Ms. SANCHEZ: Exactly.

Ms. COLLIER: …in, you know, the Revolution.

Ms. SANCHEZ: And they were just targeting us.

Ms. COLLIER: It's just wrong.

Ms. SANCHEZ: They weren't even just - why don't you just tax a little bit for everybody? Why not liquor?

ELLIOTT: But down the street at the King Corona Tobacco Bar, Hassan Maziad of Palm Harbor doesn't have much sympathy.

Mr. HASSAN MAZIAD: Well, forty cents, poor people. They're spending $5 on a cigar, or $10. Forty cents is nothing.

ELLIOTT: And besides, he says, higher tobacco taxes might deter people from smoking. That's what public health advocates are counting on.

Debbie Elliott, NPR News.

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