Tobacco Tax Logic

Posted May 06, 2009, at 6:26 p.m.

Last month, the federal tax on cigarettes was raised to $1 a pack. At the same time, the tax on so-called little cigars and loose tobacco was raised to the equivalent of $1 per pack, for the first time equalizing the tax on cigarettes and tobacco products. Now it is time for Maine to do the same.

Even before the federal tax jumped from 39 cents per pack to $1, cigarette sales were dropping. At the same time, sales of loose tobacco and little cigars were increasing. Sales of cigarettes dropped by more than 4 percent between 2007 and 2008, according to the U.S. Alcohol and Tobacco Tax and Trade Bureau. During the same time, tobacco for roll-your-own cigarettes grew by 14 percent and sales of little cigars by 15 percent.

This is not a trend that lawmakers should perpetuate by keeping the tax on these products artificially low.

Maine currently taxes a pack of cigarettes at $2. The state tax on a 20-pack of little cigars is 68 cents and the tax on the loose tobacco equivalent of 20 cigarettes is only 46 cents, making these products much less expensive than the equivalent number of cigarettes.

A major rationale for Maine’s high cigarette tax is to reduce smoking to improve the health of Maine residents and, therefore, reduce health care spending. Following the same logic, the state should not tax other tobacco products at a lower rate when they have the same ill health effects.

The Legislature’s Health and Human Services Committee will consider two bills to equalize the state’s tobacco tax next week. One, LD 1347, would also raise the cigarette tax to $3 per pack. While seeking to further reduce Maine’s smoking rate is admirable, continuing to rely on smokers to raise revenue is not a good plan. The American Cancer Society says a $1-per-pack increase will prompt more than 5,000 Mainers to quit smoking and reduce health costs by more than $200 million. But it also notes that the tax increase will generation more than $32 million in revenue for the state. This is an enticing argument, but one that was rejected by lawmakers in 2007. It should be rejected again, as lawmakers should look for ways to reduce government spending, not raise revenue by hitting smokers again.

The other bill, LD 919, would bring taxes on tobacco products more in line with the state’s cigarette tax without raising cigarette taxes. It would also tie future tie future tobacco tax increases to increases in the cigarette tax. This is a worthwhile path to follow.

SEE COMMENTS →

ADVERTISEMENT | Grow your business
ADVERTISEMENT | Grow your business

Similar Articles

More in Opinion