ANNAPOLIS – Gov. Parris N. Glendening wants to impose a 25 percent wholesale tax on cigars and smokeless tobacco, which, if approved by the legislature would be the first time those products were singled out for a levy.
Neil Bergsman, director of budget analysis, confirmed the cigar tax would be a first for the products, although they are subject to the 5 percent sales tax. The proposed tax is expected to generate $4 million in new revenue, he said.
Ray Feldmann, the governor’s press secretary, said Glendening felt it would be hypocritical not to tax all tobacco products. “I think he thought it would be inconsistent with what he’s trying to achieve,” he said.
Glendening also has proposed a $1 per pack cigarette tax; both tobacco taxes are aimed at discouraging youth smoking.
Since the primary objective of the tax is to improve public health, it made sense to cover cigars and smokeless tobacco as well. “They obviously have their health effects, too,” Feldmann said.
To institute a 25 percent tax on the wholesale price where no tax had been before is a hefty jump, but Bergsman pointed out that with the planned dollar-a-pack increase, the tax rate on cigarettes will be near 30 percent. The new cigar and smokeless tobacco tax would be consistent with that figure.
There were also political reasons. Last year Sen. Christopher Van Hollen Jr. (D-Montgomery) proposed a 25 percent tax increase on cigars and smokeless tobacco products, but the bill died. At that time, Maryland was one of only eight states that did not tax smokeless tobacco.
“We wanted to pick a number the legislature had already seen,” Bergsman said.
While the tax is aimed at wholesalers, Bergsman acknowledged that the consumer would ultimately pick up the tab. “The additional cost we presume will result in a price increase,” he said.
Which is precisely the point: discourage smoking by increasing the cost. This assumption is built into the governor’s budget proposal. According to figures released last week, the planned tobacco taxes would bring in $155 million in the year 2000, $245 million in 2001 and $220 million in 2002. The revenues will begin to decrease by the third year of the tax because the administration assumes there will be declines in consumption, Bergsman said.
The cigar tax is “long overdue,” said Kari Appler, project coordinator for Smoke Free Maryland, a lobbying group comprising more than 65 business organizations.
Smoke Free Maryland is confident the tobacco taxes will pass this year since a majority of both houses of the legislature already have endorsed them, said Appler. The public wants them, too, she said. In a June survey of 1,500 Maryland voters, Smoke Free Maryland found that 61 percent supported an increase of the cigarette tax to limit teen smoking.
Pro-tobacco forces are just as confident they will defeat the measure.
“If [Glendening] believes adults should smoke less or use less tobacco, we’re talking about Prohibition,” said Alan Hilburg, spokesman for the Smokeless Tobacco Council, a trade association. “Adults have a right to use tobacco. It’s a legal product.”
To the cigar industry, which has mostly avoided the regulatory reach of government, this tax may be coming at an inopportune time. After four years of record-breaking sales, 1998 consumption figures are expected to be down 10 to 12 percent, according to Norman Sharp, president of the Cigar Association of America.
“The [cigar] craze is over,” Sharp said.
At the Annapolis Cigar Company, on Main Street in downtown Annapolis, Assistant Manager David Jeyes opposes such a tax.
“Taxation of cigars is a horrible thing,” Jeyes said. “It could be possible that [Glendening’s] making a big mistake.”
Jeyes is concerned that the tax will put the squeeze on him and his competitors, The Smoke Shop and Fader’s Tobacconist, both in Annapolis.
“If that tax happens, at least one if not two of us have to go,” he said, “because there’s only so much market.”
Jeyes is skeptical that the tax will discourage smoking and even more skeptical about the health risks. He says he usually smokes a cigar a day, and is only “slightly concerned” about health issues. “The fact of the matter is,” he said, “there’s no good information about health risks.” -30-