Study Says Cigarette Tax Hike Will Cost Jobs and $86.8 Million in Lost Revenue

ANNAPOLIS, Md., Nov. 2 /PRNewswire/ -- A proposal to double Maryland's cigarette tax to $20 per carton will mean lost sales and lost jobs among Maryland convenience stores, according to an economic study commissioned by the Mid-Atlantic Petroleum Distributors' Association (MAPDA).

The Sage Policy Group study(1), "Prospective Impact of $2 Maryland Cigarette Taxes," projects that a $10-per-carton tax increase proposed by Governor Martin O'Malley will lead to lost sales of 72 million packs of cigarettes(2). This equates to $218 million in lost revenue for Maryland retail establishments and would translate to a total loss of almost 6,200 jobs statewide.

"Contrary to what tax proponents believe, most of the decline in tobacco sales will not come from smokers giving up the habit," said Peter Horrigan, president of MAPDA. "The reality is that Maryland smokers will find less expensive ways to get their tobacco products, like from the black market, Internet, or one of our neighboring states, all of which would have significantly lower tax rates than Maryland. The fact that wholesalers and retailers will lose substantial revenue and hard-working Marylanders will lose their jobs cannot be ignored."

The study concludes that higher cigarette taxes increase cigarette smuggling, crime and violence. "Doubling the state's cigarette tax puts money in the pockets of criminals at the expense of hard-working Maryland business owners," Horrigan says. "Not only that, with more and more cigarette smugglers operating throughout our state the personal safety of retail and wholesale employees, and their customers, is potentially put at an even greater risk."

Horrigan added that higher cigarette taxes unfairly burden lower-income and working-class adult smokers. "Cigarette taxes are extremely regressive, disproportionately affecting lower-income smokers," Horrigan said. "It's wrong to continue to force tax increases on those who are least able to afford it(3)."

Horrigan is urging MAPDA members and anyone else concerned about high taxation to contact their state legislators and ask them to vote against any cigarette tax increase. "We must make our voices heard and stand up against this unfair tax increase that boosts the profits of tobacco smugglers and black market dealers while punishing legitimate Maryland business owners and the adult smokers in our state," Horrigan said.

(1) The "Prospective Impact of $2 Maryland Cigarette Taxes" study can be
found at http://www.mapda.com/SagePolicyStudy07.pdf

(2) Lost Pack Sales and Tax Revenue to Bordering States from $1.00
Cigarette Tax Increase at 72 million packs. Total estimated lost tax
revenue: $86.8 million


BORDERING STATE EXCISE TAX SAVINGS
per pack per carton
Virginia $0.30 $17.00
West Virginia $0.55 $14.50
Delaware $1.15 $8.50
Pennsylvania $1.35 $6.50

(3) Maryland Smokers' Economic Tax Profile


MARYLAND SMOKERS' CONTRIBUTIONS TO THE STATE ECONOMY - FY2006


In 2005, the 18.9% of adults who comprise Maryland's smoker population paid more than their fair share in taxes and tobacco settlement payments because they chose to buy a legal product:

Excise Taxes Sales Taxes Tobacco Settlement Total Smoker Payments
Payments FY2006
$274,107,000 $54,547,000 $130,600,000 $459,254,000

TOTAL TOBACCO SETTLEMENT PAYMENTS TO MARYLAND
TO DATE (1998-2006): $1,061,200,000

Maryland Smokers' Economic/Tax Profile 2005:
-- Maryland smokers' median household income $42,582
-- Maryland nonsmokers' median household income $65,809

Tax and settlement payment liability paid only by smokers in FY2006:
-- Total average paid per Maryland smoker in excise and sales taxes $441
-- Cost per Maryland smoker for settlement payments to Maryland $175
Total annual payments to Maryland per smoker $616

Payments by Maryland smokers in FY2006 were:
-- More than sixteen times as large as state excise taxes on alcoholic
beverages in FY2006 ($28 million).
-- Larger than FY2006 Death Taxes ($274.9 million).
-- Twice as large as FY2006 business franchise taxes ($196.2 million).


Maryland smoker payments of OVER $459 MILLION were large enough to support FY2006 operating budget appropriations for:

-- Governor's Office of Crime Control and Prevention ($47.7 million) AND
Department of Aging ($46.4 million) AND Maryland Stadium Authority
($34.6 million) AND Health Insurance Safety Net Programs ($66.7
million) AND Baltimore City Detention Center ($71.5 million) AND
Maryland Port Administration ($180.9 million)
OR
-- Department of Natural Resources ($278 million) AND Community Services
Administration ($133.8 million)
OR
-- Department of Agriculture ($90.1 million) AND Department of State
Police ($268.5 million) AND Educational Excellence Awards ($61.3
million)
OR
-- Family Health Administration ($166.9 million) AND Department of the
Environment ($196.9 million).

TOTAL SMOKER CIGARETTE PAYMENTS TO MARYLAND FY2006

Per year: $459,254,000
Per day: $1,257,369
Per hour: $52,390
Per minute: $873
Per second: $15

CIGARETTES DON'T PAY TAXES -- MARYLAND SMOKERS DO!!