Plans to hike tobacco taxes could cause shoppers to go elsewhere, storeowners say

Posted May 06, 2013, at 9:11 p.m.
Last modified May 07, 2013, at 9:26 a.m.

AUGUSTA, Maine — An 18-year-old high school junior joined doctors, educators and anti-smoking advocates Monday in renewing the call to raise state taxes on cigarettes and other tobacco products.

Levi Smith, a student from Mount Vernon who attends Maranacook Community School, teamed up with representatives of the American Lung Association, Maine Medical Association and other members of the Cancer Action Network in attempting to convince the Legislature’s Taxation Committee that increasing the tax on tobacco products will lead to reduced youth smoking and lower overall health care costs.

“They call us their ‘replacement smokers’ because so many people die from smoking that tobacco companies have to find new smokers all the time,” Smith said in a prepared statement. “The methods they use are disgusting, the habits are disgusting and their products are disgusting.”

Representatives of convenience stores and other tobacco sales outlets countered that higher taxes on tobacco products would divert customers to New Hampshire, the Internet or a black market. Because smokers often buy other items when they purchase cigarettes, a tax increase that drives them to shop elsewhere would disproportionately harm small businesses, they argued.

The latest debate over raising Maine’s tobacco tax played out Monday during public hearings on two bills. One, LD 1406, sponsored by Democratic Rep. Richard Farnsworth of Portland, would bump Maine’s cigarette tax from $2 per pack to $3.50 per pack. Farnsworth’s bill would funnel revenue generated by the tax increases into smoking prevention and public health programs administered by the Fund for a Healthy Maine.

Proponents forecast that Farnsworth’s bill would add $47.37 million annually to the state’s revenue stream. Because Farnsworth introduced LD 1406 as an emergency measure, the tax increase would take effect on July 1 if the bill passes with two-thirds majorities in the Maine House and Senate, then gains the signature of Gov. Paul LePage.

Ed Miller of the American Lung Association testified that lawmakers in all six New England states are considering cigarette tax increases and that keeping pace would be good public health policy for Maine. Rhode Island, which tops New England with a tax of $3.50 per pack, is considering a hike to $4.40 per pack. At $2 per pack, Maine has the second lowest cigarette tax in New England, behind New Hampshire, where the rate is $1.68 per pack.

Testifying in opposition to what he described as a “staggering” tax increase proposal, Steve Ryan of the New England Convenience Store Association suggested a tax that adds $15 to the cost of a pack of cigarettes would spur Mainers to shop elsewhere.

“Other states are recognizing that adult smokers will go to other sources if the over-the-counter tax gets too high,” he said.

John Babb, president of J&S Oil, which employs more than 200 people at eight convenience stores, said a higher cigarette tax would create a greater competitive disadvantage for Maine retailers, making it harder for them to pay a livable wage.

A second bill, LD 1326, sponsored by Democratic Rep. Megan Rochelo of Biddeford, would tax all tobacco products — including cigars, loose tobacco and smokeless tobacco — at the same rate as cigarettes.

Proponents said LD 1326 would close a loophole that they believe tobacco companies use as a marketing tool to entice young people to use tobacco.

“I do not believe the Taxation Committee should be picking winners and losers,” Miller said, arguing that all tobacco products should be taxed at the same rate.

But Ken Nagel of the Cigaret Shopper, which has 17 stores in Maine, told legislators “every bill that you guys are faced with picks winners and losers,” and that job losses could be among the unintended consequences of passing LD 1326.

Gena Canning of Pine State Trading urged legislators to reject LD 1326 to allow President Barack Obama’s administration to set national standards for taxing tobacco products other than cigarettes.

“That creates a tax at the supply level,” she said. ”That at least creates a playing field on which legitimate businesspeople can do business.”

The Taxation Committee, which heard more than three hours of testimony Monday on the two bills, has yet to schedule work sessions on them.

Maine’s Revenue Forecasting Committee projects that the state will collect $138.2 million in cigarette and tobacco taxes during the current fiscal year.

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