Rise in Tax, Drop in Cigarette Sales May Squeeze Md.'s Expected Revenue
Thursday, July 31, 2008
Cigarette sales have dropped by nearly 25 percent in Maryland since the state's tobacco tax doubled in January, as sticker shock apparently has curtailed some residents' smoking and sent others across the border for better deals.
Maryland lawmakers voted last fall to raise the tax to $2 a pack to help bridge a budget shortfall and expand subsidized health care. Fiscal analysts predicted that the new rate, the sixth highest in the nation, would cause cigarette sales to drop off, following a pattern with past increases.
But the decline during the first six months of the year significantly exceeded their projections, exacerbating Maryland's budget problems and prompting speculation about what other factors might be at play. The tight economy, for example, has almost certainly added incentive for some to kick the habit.
Still, "it's unlikely that this is exclusively because of an abrupt cessation of smoking on the part of Marylanders," said House Majority Leader Kumar P. Barve (D-Montgomery), who suggested that people are probably picking up extra packs of cigarettes when they are in the District, Virginia or Delaware, all of which have lower tax rates.
The District's levy is scheduled to increase from $1 to $2 in October, matching Maryland's.
To the extent people are smoking less because of Maryland's higher tax rate, "that's a good thing," Barve said. "We're happy to collect less revenue for that reason."
His view is echoed by health advocates, who have championed higher taxes on cigarettes in Maryland and other states to reduce teen smoking in particular. The Campaign for Tobacco-Free Kids says numerous studies in the past decade suggest that every 10 percent increase in the price of cigarettes reduces youth smoking by about 7 percent and overall cigarette consumption by about 4 percent.
"This is a wonderful public health victory for Maryland," said Vincent DeMarco, president of the Maryland Citizens' Health Initiative, adding that a decline in smokers will save taxpayers millions in state health-care costs.
Smoking in the Free State has become an expensive vice. Once tobacco and sales taxes are factored in, it is nearly impossible to buy a pack of 20 cigarettes in Maryland for less than $5. Most brands will set you back at least $6 a pack, and the higher-end labels cost more.
Legislative analysts say they are looking at the degree to which Marylanders are crossing borders to buy cheaper cigarettes. It seems to be happening to some extent.
On a recent afternoon, two service stations along South Dakota Avenue NE in the District were packed with vehicles with Maryland tags, many belonging to commuters heading to Maryland by Route 50 or the Baltimore-Washington Parkway.
"The tax is not going to stop people from buying cigarettes," said Mike Brockington, a 40-year-old Prince George's County resident, adding that he was purchasing cigarettes in the District because of Maryland's tax increase.