Group to Campaign for Cigarette, OTP Tax Hike in Maryland

Seeking $1-per-pack increase; N.J. looking at taxing cigarettes, little cigars the same

BALTIMORE -- The Maryland Citizens' Health Initiative is starting a campaign asking the General Assembly to increase the state's $2-a-pack tax on cigarettes to $3 and raise taxes on other tobacco products, including cigars and smokeless tobacco, said the Washington Times.

Vincent DeMarco, a health lobbyist who has long championed so-called "sin taxes" on tobacco and alcohol--hopes to build on momentum from this year's assembly, in which legislators voted to increase the state's alcohol sales tax from 6% to 9% after several years of lobbying.

He said more than 100 community groups already have backed the tobacco-tax proposal. "Many smokers appreciate increases in the tobacco tax to help them quit."

Maryland taxed smokers just 36 cents a pack on cigarettes before 1999, when the rate was increased to 66 cents. A second increase moved the rate to $1 in 2002, and state lawmakers again raised the tax, to $2 a pack, during their 2007 special session, said the report.

The state's $2 rate on cigarettes is tied for 11th highest in the country, according to the report, citing the Federation of Tax Administrators. The District tax is $2.50 a pack, while Pennsylvania and Delaware charge $1.60 and Virginia charges 30 cents--the second-lowest rate in the country behind Missouri's 17 cents. New York has the highest tax rate on cigarettes at $4.35 a pack.

Critics have argued that such tax increases put a strain on smokers' personal expenses and harm Maryland businesses by forcing residents to buy their tobacco products in other states, said the report.

In addition to raising the price of cigarettes, DeMarco said, his group's proposal also would increase the current 15% excise tax on other tobacco products (OTP). The 15% rate was instituted in 1999 and has since gone unchanged.

DeMarco said his group has yet to target a specific OTP rate increase but its final proposal could be similar to an unsuccessful bill introduced last session by Delegate Sheila E. Hixson (D), that would have raised the cigarette tax to $3 and the OTP excise tax from 15% to 95%, with a $3 cap on taxes applied to cigars.

Meanwhile, a bill under consideration in New Jersey is seeking to even the playing field of cigarettes and little cigars, by taxing them the same, reported the Press of Atlantic City.

"The additional tax will make little cigars less appealing to current cigarette smokers seeking a cheaper alternative," the bill proposed by State Senator Paul Sarlo (D) reads.

New Jersey's $2.70 per cigarette pack state excise tax makes it the sixth highest in the country. In 2010, the Office of Legislative Services estimated that the bill would increase tax revenue from $6 million to nearly $9 million. The office also estimated that more than 5 million packs of little cigars were sold in fiscal 2010.

Although New Jersey collected nearly $742 million in cigarette taxes last year, it was a 4% drop, or $33.1 million less than 2008, according to state Treasury Department data cited by the paper.

Revenue from other tobacco products, however, went up 26% in that time frame--generating $3.7 million more, despite lower tax rates. The state has a wholesale tax on those products that is 30% of the price the wholesaler pays the manufacturer.

One retailer, who has come to rely on the higher-margin sales of little cigars, told the paper, "People will still buy them, as long as they're reasonable enough. … As long as there are savings involved, I think a market will still be there."

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