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Published on February 26th, 2014 | by Jeremy Bauer-Wolf

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50% hike in cigarette tax gets hearing

By Jeremy Bauer-Wolf

Jeremy@MarylandReporter.com

Cigarette butts

Photo by Lynn on Flickr

Health care advocates are stoking the tax fires again with legislation that would make Maryland’s tobacco taxes some of the highest in the country.

The Senate Budget and Taxation Committee heard testimony Wednesday on SB 589, which would increase the tobacco tax rate from $2 for a pack of cigarettes to $3. The bill also calls for steep hike on all other tobacco products — from 30% to 95% of the wholesale price.

Products affected would include cigars, roll-your-own, and forms of smokeless tobacco.

The bill would give Maryland the fourth highest tobacco tax rates in the nation. No. 1 is New York at $4.35 per pack of cigarettes. (Cigarette smugglers nabbed by comptroller’s agents coming through Maryland from 30 cents-a-pack Virginia are often headed to New York.)

Maryland is currently ranked at 12th highest by the Campaign for Tobacco-Free Kids.

19 sponsors

The bill’s lead sponsor, Sen. Verna Jones-Rodwell, a Baltimore Democrat, testified with Montgomery County Sen. Richard Madaleno, one of 18 other co-sponsors, that the initiative would improve the health of Marylanders, and that some of the revenue generated by the new higher tax rates could be funneled into tobacco education programs.

cigarette

Photo by Raul Lieberwerth

The Department of Legislative Services estimated roughly an additional $110 million from the increase.

“I think this is what most states are going to wind up doing over the next few years,” Madaleno said.

The bill also requires the inclusion of $21 million to the state’s Tobacco Use Prevention and Cessation Program beginning fiscal year 2016, an uptick from the allotted $10.6 million in the proposed fiscal 2015 budget.

The Tobacco Use Prevention and Cessation Program attempts to reduce tobacco use statewide, and subsequently prevent mortalities caused by tobacco products. It is primarily funded by Maryland’s declining Cigarette Restitution Fund, proceeds from settlement of a multi-state lawsuit that is parcelled out incrementally from some of the nation’s largest tobacco companies to the states that filed suit.

Cross-border sales a worry

Republican Sen. Richard Colburn from the Middle Shore expressed concerns that his constituents from Caroline, Dorchester, Talbot and Wicomico counties might be tempted to visit bordering states with lower tax rates, including Delaware and Virginia.

“They can get cigarettes at a much cheaper cost, which might encourage smuggling,” Colburn said.

Delaware’s tax rate is $1.60 per pack, while Virginia’s can be as low as 30 cents per pack.

Vinny DeMarco, president of Maryland Citizens’ Health Initiative, said that there’s been a significant decline in the number of smokers in Maryland — not just a decrease in the packs of cigarettes purchased in-state — particularly since tobacco taxes were raised significantly.

Maryland has seen several tax increases over the years — in 1999 the rate jumped from 36 to 66 cents per pack, and in 2002 the rate increased to $1 per pack. In 2007, the legislature doubled the rate to $2 a pack.

Some oppose tax hikes on smokeless tobacco

One of the bill’s opponents, Bill Godshall, is president of a nonprofit group — Smokefree Pennsylvania — that Godshall said actually advocates for increasing cigarette tax rates.

Godshall said he wants the legislature to increase the cigarette tax by an additional $1 per pack, but reject the stipulations regarding other tobacco products.

“Smokers who switch to smokeless tobacco products reduce their disease risks nearly as much as smokers who quit all tobacco use,” he said during the hearing.

Ronald Ward, director for the Consumer Advocates for Smoke-Free Alternatives, agreed with Godshall’s points, saying that his organization suggests smoke-free tobacco products for chronic smokers.

“Simply stated, smokeless tobacco products are far less hazardous alternatives to cigarettes, and accordingly, should not be subjected to burdensome and punitive taxes,” Ward said in his testimony.

The House version of the bill, HB 443, had its hearing in the Ways and Means Committee Feb. 20.

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  • abby_adams

    Love the “estimated” amount to be collected from hiking the tax. Higher taxes usually equal lower revenue collected, especially when a smoker lives near a border state with lower taxes. So I ask, where will the $110 M be used or will it go into “general funds” aka the legislature’s “slush fund”? Since MD Health Exchange rates also penalizes smokers, raising this tax is just another double whammy for those who really need more than “talk” therapy to end the habit.

  • Dale McNamee

    I wonder how the “health care advocates” feel about marijuana smoking ? After all smoke is smoke is smoke… Not good for lungs…

    Also, where are the “savings” that were supposed to be realized by having people quit smoking ?

    This tax increase will fuel more verspending anyhow…

  • Alan Selk

    I sure wish the black market folks would sell stock. Now would be a good time to invest. At present 26% cigarettes sold in Maryland are black market. That number is only going to go up. The criminals are jumping for joy at the ignorance of Sen. Verna Jones-Rodwell and his cronies. These politicians need to take some economics 101 courses at the local community collage.

    What this tax increase will guarantee is that revenues will go down and the illegal trade in cigarettes will go up.

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