March 8, 2012

Maryland could have highest tax rates in US on certain tobacco products

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By Daniel Menefee
Dan@MarylandReporter.com

The Senate Budget and Taxation Committee heard testimony Wednesday on a proposed tax hike on cigars and smokeless tobacco products that could reach as high as 95%, but would exempt premium cigars.

rolling tobacco

By The Integer Club

If passed, Maryland would have the highest tax rates on non-premium cigars and smokeless tobacco in the U.S., according to the Cigar Association of America.

“While cigarette smoking among high school students has decreased by nearly 40% since 2000, cigar use has increased by more than 11% during the same period,” said Sen. Jennie Forehand, D-Montgomery, the sponsor of the tax.

She said a tax increase on “other tobacco products” (OTPs) would curb the rise in cigar and smokeless tobacco use recently documented among teenagers in the state. Nearly 9% of high school males in Maryland chew tobacco.

Forehand cited a study from the Campaign for Tobacco Free Kids that concluded increased taxes on cigars and chewing tobacco would reduce teenage tobacco use by 30% in the state.

She trumpeted the success of three cigarette tax hikes over the last decade for a significant reduction in smoking and smoking-related deaths in Maryland.

“As a result of three cigarette tax increases over the past decade, we have reduced cigarette smoking by 32%, double the national average,” Forehand said. “This has kept over 200,000 Marylanders from becoming addicted to cigarettes — over 70,000 of whom would have died terrible tobacco-caused deaths.”

The proposal also calls for an additional $1 tax per pack on cigarettes that would add “another $100 million to the state coffers,” Forehand said.

Revenue from the tax on OTPs nets almost $250 million through fiscal year 2017, according to the proposal’s fiscal note.

Under the new tax rates, the tax would be 95% of the wholesale price for cigars and not exceed $3 per cigar. The tax on snuff would be of 95% of the wholesale price or $3 per tin container, whichever is greater. Loose tobacco, or roll-your-own, would be taxed at $3 for every .65 of an ounce. The additional 6% retail sales tax would then kick in on top of these new taxes.

The tax on loose tobacco brought the strongest rebuke from Dan Doherty of the Cigar Association of America, who said the OTP tax on a pound of lose tobacco would run $74 before the 6% retail sales tax, bringing the retail price of a pound of loose tobacco to $110.

Forehand has offered an amendment to her bill that exempts premium cigars, because “children don’t typically buy premium cigars.” This also raised objection from Doherty, who is against any increase in OTP taxes.

“When you start talking about the differences among cigars, it is very hard to classify premium versus machine-made and lower priced [cigars],” Doherty said. “This bill creates all kinds of administrative problems and ambiguities that may be illegal or even unconstitutional.”

Forehand said the revenue would go to expand health care and increase funding for smoking cessation programs in Maryland. She noted that 300,000 Marylanders received expanded health coverage from the 2007 cigarette tax hike.

Sen. David Brinkley, R-Carroll, said the statistics showing less smoking as a result of higher taxes were dubious because tax hikes force smokers to buy across state lines where cigarette prices are lower.

“Cigarette sales have gone down, but it doesn’t mean tobacco use has gone down,” Brinkley said. “Where I live in Western Maryland, a tax holiday is just a few miles away. From my house I can see three other states. The cross-border sales are phenomenal and we’re losing revenue.”

  • abby_adams

    At a retail value of $110 a pound, this could be a boom for underground sales. Get real! Unless the state wants to put up a border fence around us to monitor the ebb & flow of commerce, those users or cash purveyors will take their purchasing power elsewhere. Somebody needs to check the meds these legislators are taking. What they need is a big dose of reality!

  • jim

    I bet after passing such things, those that did the passing will pull their “premium” cigars out of their pockets and light up in their office for a victory smoke. Virginia and Delaware get even more business. Now I will go to VA or Delaware to buy not only my houshold goods, fuel etc.. but I will also be buying my cigars there.
     Im sure I am the only one that will be doing this, so no problem MD, you wont even notice the drop in revenue… idiots.

  • EyesWideOpen

    I already go to DE to get my beer to avoid the 9% sales tax, no big deal to buy ciggs there too!!    I can’t wait to get out of the hell whole that they call Maryland, away from all the idiot libtards in our local goverment.

  • Victor Kluth

    Wasn’t a country developed from outrageous taxation… Keep it up!  We’re getting to close to be coming the “Unites States Socialist Republic”!

    The “United States of America” will rise, “AGAIN”!

  • Dale Mcnamee

    I guess that they never learn that the more you tax something the less you have of it and since you have lesser sales, you have lesser revenues…

  • cwals99

    That’s alright.  We need people to get fed up with the governance in order to make the changes!

  • Scrocetti

    VOTE DIFFERENTLY and encourage your friends to vote – we can’t rid the taxation extremes in MD with all the Dems in control.  I pay my fair share – stop picking my pockets for the rest.

  • Casper Steve

    this once great state of maryland has gotten out hand with taxes.. i hope n pray they go bankrupt… whats the states excuse inbuying communist chinnese built crane for the port of maryland n now its steel is in bankruptcy n all those workers out of work.. go gov/nor o’malley.. tax us sum more.. so long md.. hello virgina here i come..

  • Casper Steve

    ooo 4got.. they seem to hv forgotten what excess taxsation of tea did.. the great tea party… maryland wake up.. instead of throwi.g tea overboard everyone should take their politician tie n anchor around their neck n throw them inthe deepest part of the bay.. revolution is on its way.. history always repeats itself..