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Familiar tobacco tax proposal resurfaces in Annapolis

Daniel Leaderman//Daily Record Business Writer//February 17, 2016

Familiar tobacco tax proposal resurfaces in Annapolis

By Daniel Leaderman

//Daily Record Business Writer

//February 17, 2016

ANNAPOLIS – As in years’ past, health advocates are asking Maryland lawmakers to increase the state’s tax on cigarettes and other tobacco products while the business community is asking them not to.

A bill sponsored in the House by Del. Eric Luedtke, D-Montgomery, and Del. Barbara Frush, D-Anne Arundel and Prince George’s, would raise the tax on a pack of cigarettes from $2 to $3; the tax on other tobacco products, such as smokeless tobacco and non-premium cigars, would increase to at least 74 percent of the wholesale price or a fixed amount – whichever is greater.

Advocates say three previous cigarette tax hikes since 1999 have helped drive the state’s adult smoking rate down more than 30 percent.

Luedtke began his testimony Wednesday at a hearing before the House Ways and Means Committee by talking about his mother, a former smoker who recently passed died of esophageal cancer.

“Thousands of people die deaths like that every single year because of preventable causes,” Luedtke said. “We know that increasing the tobacco tax will stop people from using tobacco, particularly young people.”

Similar versions of the House Bill 71, known as the Healthy Maryland Initiative, have been proposed and rejected in previous legislative sessions. Last year’s version also included increases in tobacco-related license fees.

This year’s bill is stripped of the licensing provisions but still drew fire from business representatives.

Decreased tobacco sales means stores will also lose sales on lottery tickets, sodas and other items bought by people when they purchase cigarettes, said Kirk McCauley, director of member relations and government affairs for the Washington, Maryland, Delaware Service Station and Automotive Repair Association, which also represents convenience stores.

Driving to other states to buy tobacco is too easy for the proposed law to be effective without hurting Maryland businesses, McCauley said.

The Maryland Retailers Association argued in written testimony that tobacco taxes like the one proposed are regressive, causing more harm to lower-income earners, and that the revenue generated by the tax hike is unsustainable because smoking has been decreasing for decades.

Enforcement questions

Del. Jay Walker, D-Prince George’s, said he worried that increasing taxes risked putting retailers out of business, particularly because his district borders Virginia, where the tax on cigarettes is only 30 cents per pack.

Walker asked supporters of the bill what is being done to enforce penalties for retailers selling tobacco to minors.

Vincent DeMarco, president of the nonprofit Maryland Citizens’ Health Initiative and longtime advocate of tobacco taxes, said the new tax revenue would provide funding for enforcement efforts against those retailers, which are usually handled by local jurisdictions.

The bill mandates that the governor increase annual funding for the state’s Tobacco Use Prevention and Cessation Program from $10 million to $21 million starting in fiscal 2018.

Legislative analysts predict the taxes set by the bill would bring in $95.2 million in new general fund revenue in fiscal 2017, a figure that would gradually decrease in each successive year.

But even if the bill should pass the legislature, Gov. Larry Hogan has stated his opposition to tax increases.

The state’s Department of Budget and Management urged the committee to reject the bill due to the $11 million effective spending requirement.

OTP tax

Members of the Senate Budget and Taxation Committee, meanwhile, heard a proposal to decrease one specific tobacco tax.

A bill sponsored by Sens. John C. Astle and James E. DeGrange Sr., both Anne Arundel County Democrats, would lower the other tobacco product, or OTP tax, on the wholesale price of premium cigars from 15 percent to 7.5 percent.

Paul Spence, president of the Maryland Premium Cigar Retailer’s Association, which supports Senate Bill 320, told The Daily Record that Maryland’s tax was putting many of the state’s small businesses at a disadvantage because surrounding states either have lower rates or no tax at all.


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