Tobacco tax a fix for state budget?

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Gabor Degre | BDN
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By Kevin Miller, BDN Staff
Posted Dec. 21, 2009, at 7:56 p.m.

AUGUSTA, Maine — Health groups called on state lawmakers and Gov. John Baldacci on Monday to increase Maine’s cigarette tax by $1 a pack as a way to narrow the budget gap while discouraging smoking, especially among young people.

Maine now collects $2 in taxes for every pack of 20 cigarettes sold in the state, while federal taxes add another $1.01 to the cost of each pack. That places Maine in the upper third nationally but below all the other New England states except New Hampshire.

Maine’s cigarette tax has held steady at $2 a pack since 2005 despite several proposed increases.

But representatives of the Maine Medical Association, American Lung Association of Maine and the American Heart Association of Maine argued that another tax hike makes sense from a financial and public health perspective.

Coalition members predicted that a $1-a-pack increase would generate an additional $26.2 million annually for the state while deterring 8,500 young people from beginning smoking and convincing 4,600 current Maine smokers to quit.

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“The last time we raised the tobacco tax by $1, we had unprecedented numbers of people in the state try to quit,” said Edward Miller with the American Lung Association.

The groups made their proposal three days after Baldacci released his plan for closing a $438 million budget hole without resorting to new or higher taxes.

Baldacci has supported past proposals to increase Maine’s tobacco tax, including one plan to use revenue from cigarette sales to fund the state’s controversial Dirigo Health program.

But the governor has been outspoken recently that he will not support broad-based tax increases to close the latest budget shortfall.

Instead, the governor’s supplemental budget proposal contains additional cuts on state agencies, including $73 million from education and $68 million from health and human services. It also proposes three additional government shutdown days on top of the 20 built into the current two-year budget and again recommends the consolidation of several natural resources agencies.

“At this point, we think that’s the best plan moving forward,” Farmer said. “We need to fully explore those alternatives before we talk about new revenue.”

Retailers also are likely to oppose any tax hike on cigarettes and other tobacco products, such as loose-leaf tobacco for handmade cigarettes and chewing products.

“The tax they are proposing is higher than the value of the product itself and it will drive consumers, as we have already seen, to online Internet sites where there is no tax,” said Shelley Doak, executive director of the Maine Grocers Association, which represents supermarkets and grocery stores. “It will also drive consumers across the border to New Hampshire and other states.”

National anti-smoking groups, such as the Campaign for Tobacco-Free Kids, claim that cigarette consumption declines by 4 percent for every 10 percent increase in the price of cigarettes. Higher prices can be especially effective at deterring younger smokers, speakers said Monday.

Members of the coalition also called on Maine lawmakers to “equalize” the taxes levied on smokeless tobacco and small flavored cigars, which are popular among some teenagers.

Gordon Smith, executive vice president of the Maine Medical Association, said he believes lawmakers and the governor will warm to the idea when the effects of additional budget cuts on critical state services become clear.

“It’s not just a tax,” Smith said. “It is also a public health measure, and the governor has been very, very supportive of public health measures.”

Earlier this year, Maine lawmakers changed the way that state excise taxes were collected on smokeless tobacco by shifting to a system that calculates the total tax based on the weight of the product. That shift was supposed to generate additional money.

More than 15 states plus the District of Columbia increased their cigarette taxes in 2009 alone in response to the recession, according to data supplied by the National Conference of State Legislatures.

Connecticut and Rhode Island both added an additional $1 to the cost of cigarettes, raising state taxes there to $3 and $3.46, respectively.

Several states, including Maine, have increased cigarette taxes more than once during the past decade.

Arturo Perez, fiscal analyst for the National Conference of State Legislatures, said cigarette tax hikes are the most common type of tax increases levied by states since 2001. But proceeds from tobacco excise taxes still account for less than 2 percent of state tax revenues, he said.

“So while it is a tax we have seen states go to quite often since 2001, it does not constitute a significant portion of states’ revenue tax base,” Perez said.

http://bangordailynews.com/2009/12/21/politics/tobacco-tax-a-fix-for-state-budget/ printed on July 26, 2014