March 25, 2011 - A bill that would have raised the cigar tax in Maryland to 95 percent of the wholesale price appears to be dead after a Senate committee voted to mark the bill as unfavorable. On Monday, March 21st the Senate Budget and Taxation Committee voted 12-1 to label the bill as unfavorable, meaning it will be seen on the chamber calendar under the heading "Unfavorable Reports" and will most likely be rejected.
(Maryland Cigar Tax Bill Likely Dead, Andrew Nagy, 3/24.2011)
A proposed 500 percent excise tax increase on ‘other tobacco products’ could decimate Maryland’s cigar and pipe tobacco businesses, according to the International Premium Cigar & Pipe Retailers Association.
Maryland House Bill 853 and Senate Bill 654 both propose to increase the excise tax rate on tobacco products other than cigarettes from 15 percent to 90 percent with a $3 cap on cigars.
"When will legislators realize that tax increases like this never produce the revenues predicted and always result in negative consequences like lost jobs and businesses?" asked Chris McCalla, legislative director of the IPCPR. "In a small state like Maryland, tobacco customers can easily cross to another state or make their purchases online and pay little to no state or local taxes."
According to the Tax Foundation, a nonpartisan educational organization founded in 1937, Maryland was the only state to raise every major tax in 2008 in order to fund new spending programs including doubling of its cigarette tax from $1 to $2 per pack. The Foundation said the tax increase served to introduce record levels of bootlegged product into the state, hurt local businesses by sending thousands of the state’s smokers to surrounding states to purchase their tobacco products, and generated only half the revenue increase predicted by tax supporters.
In addition, the Children’s Health Insurance Program Reauthorization Act of 2009 is funded solely by excise taxes on tobacco products. CHIP raised federal taxes on cigarettes to more than $10 per carton and on roll-your-own tobacco from about $1.10 per pound to $24.78 per pound – a 2,253 percent increase.
"Now the Maryland legislature is considering raising excise taxes yet again on other tobacco products from the current 15 percent of the wholesale price to 90 percent," McCalla said.
McCalla believes the only result that would be sure to take place from such an action is the further destruction of Maryland small businesses, which includes the loss of jobs and state, federal and local tax revenues.
"Premium tobacco products like pipes and cigars are highly sensitive to price increases because they are more a choice than a habit. They are adult products that make ordinary moments special and special moments extraordinary, like a fine wine," he said.
McCalla urged Maryland smokers and nonsmokers alike to tell their state senators and delegates to vote no on tax increases such as these.
Reference: Proposed Maryland Tobacco Tax Increase is Anti-Business , pipesmagazine.com, 3/2/2011.