City tobacconists are hoping President Bush has one response for health insurance legislation that will reach his desk soon after Congress reconvenes: Close, but no cigar.

They say they have nothing in principle against funding health insurance for underprivileged children; they just don’t want to be stuck with the tab — one that, they claim, would be extremely detrimental to their business.

According to the legislation, versions of which passed both houses earlier this month, funding for the State Children’s Health Insurance Program would come from tobacco tax hikes that would be particularly drastic on cigars — raising the cap on federal cigar taxes to a maximum of $3 from just five cents.

“I’m not saying forget the value of the program, but it’s inappropriate to ask the tobacco consumer to pay for it,” the president and CEO of the premium cigar and cigarette maker Nat Sherman International, Joel Sherman, said. “It’ll be devastating to small-business people. The government thinks all tobacco is big tobacco. It’s the little mom-and-pop stores, it’s not big tobacco, they’re the ones who are going to get hurt. It’s not just the guy in $3,000 suits who comes into our store to buy cigars — it can be Joe Blue Collar.”

The Senate’s version of the bill calls for a 53.13% tax with a $3 cap, amended down from $10, while the House’s version calls for a 40% tax with a $1 cap.

The program, dubbed CHIP, is administered by the states. It covers families that exceed the maximum allowable income for Medicaid, but do not make enough to afford private insurance. It covers doctor visits, immunizations, hospitalizations, and emergency room visits. Although varying by state, it generally insures children up to age 19.

Basically, a $6 cigar would end up costing $9.

“It’s bad, but it is what it is,” the manager at Q Cigars on Church Street, Karina Portes, said. “There’s only so much we can do — there’s such a taboo on cigars now.”

The two bills also call for a smaller tax on cigarettes. But cigar store owners warn that there is a vast difference between cigarettes and cigars from a business perspective.

“Cigarette manufacturers have already made peace with the government. They can sustain the taxation,” the general manager of Davidoff of Geneva on Madison Avenue, David Kitchens, said. “Unlike cigarettes or alcohol or firearms, we’re a loose affiliation. There isn’t a group of people going around lobbying 24-7 and have made these long-term connections and commitments to legislators. It’s a low-key, quality-of-life-oriented industry.

“Cigars are not nicotine delivery devices; they’re much more. People who smoke cigars take a lot of time to do it, it’s not something you can stand on a street corner and smoke in three minutes,” he said.

A joint Senate-House committee will meet after the holiday to iron out disagreements, before the final bill receives another up-or-down vote and is then passed to the president.

Mr. Kitchens feels this is another example of government action at the expense of cigars, which are already taxed at the state level.

“Whether you eat too much fatty food, or drink too much wine, you damage your health in any number of ways,” he said. “But as far as me personally, enjoying a cigar the way they’re meant to be enjoyed is immeasurable as far as the quality of my life goes. People will get used to taxes and pay taxes, but if you’re trying to provide enough money to fund the program, taxing this almost backward industry just because it’s tobacco kind of defeats the purpose of it. Every time a state increases these taxes, tobacco revenues drop.”