ANNAPOLIS – State lawmakers are proposing to tax some of our bad habits in an attempt to repeal an unpopular computer services sales tax and possibly raise money for health care.
But taxes on tanning salons, cosmetic surgery, tobacco paraphernalia and alcohol, among other things, would hurt businesses and even drive people out of the state, opponents argue.
“Legislators may not want to believe it, but people are crossing over the border,” said Bruce Bereano, an Annapolis lobbyist representing several clients, including alcohol and tobacco distributors.
Lawmakers contend that nonessential services are legitimately taxable. They also want to find a way to eliminate the 6 percent computer services sales tax, which was approved during November’s special session and becomes effective in July. The tax is expected to raise $200 million a year.
Delegate Dan Morhaim, D-Baltimore County, a physician and lead sponsor of a bill to impose a sales tax on tanning salon services, said the additional fees will raise money for health care and may help discourage the practice.
“Tanning salons are related to an increase in skin cancer, especially for young people who will tan early in life and develop cancer later in life,” he said.
But Indoor Tanning Association Executive Director John Overstreet said the additional fees will strain small businesses.
“As the economy slips, these businesses struggle more and more,” he said. “[Salons] are worried about the additional cost of doing business.”
Consumers could also pay more for plastic surgery under a bill proposed by Delegate Saqib Ali, D-Montgomery, which would apply a sales tax to strictly cosmetic procedures.
“Medically unnecessary plastic surgery is a luxury item,” he said. “People who get [cosmetic surgery] can afford to pay a 6 percent sales tax.”
Ali said his goal is to find an alternative revenue source to take the place of the computer services tax, and not to discourage procedures.
But taxing plastic surgery would not bring significant revenue for the state, said Dr. Michele Shermak, chief of plastic surgery at Johns Hopkins Bayview Medical Center and spokeswoman for the American Society of Plastic Surgeons. She added that a similar tax in New Jersey has failed to raise substantial revenue.
“It’s horrible for patients and it’s horrible for physicians,” she said, predicting that doctors would lose business to other states and have a harder time getting their services reimbursed by insurance companies.
Marylanders could also be facing a $20 surcharge per item on smoking “paraphernalia,” which originally included cigarette rolling papers, pipes of several materials and “roach” clips intended to hold marijuana joints.
But lead sponsor Sen. C. Anthony Muse, D-Prince George’s, said cigarette rolling papers and pipes made out of briar, clay and the white mineral meerschaum have been amended out of the bill to avoid punishing legal tobacco smokers.
The exempted pipes, commonly found in tobacco shops, are not his target, Muse said. He wants to go after gas stations and convenience stories selling crack and marijuana pipes to youth.
He said the surcharge would go to a health fund for children.
Muse has also proposed that customers who purchase surcharged items show identification and sign a logbook, similar to several laws regarding over-the-counter drugs containing pseudoephedrine.
“It’s not meant to be a hardship on people who smoke cigarettes and tobacco,” he said. “I don’t mind signing when I need cold medicine.”
Patrons of The Smoke Shop in Annapolis, a few steps from the state house, said the original bill unfairly targeted legal tobacco smokers instead of drug users.
“Nobody smokes tobacco out of glass pipes,” said Dwight Wilcox, 50, who has been a customer for 25 years.
Although pleased with the revisions, employee and manager Chris Simmons said the rule is “messy” and suggested it would make more sense to simply outlaw certain paraphernalia instead of punishing businesses.
“It’s just some spineless politician,” said Scott Bierman, 53, a store customer for three years. “It’s very typical. They want to make a big splash and a statement.”
The legislature is also tackling a proposed hike on alcohol taxes, but Sen. Jennie Forehand, D-Montgomery, lead sponsor of one version of the bill, said it is mostly intended to help eliminate the computer services tax and will not punish drinkers.
Forehand’s bill would adjust the tax from $1.50 to $4.50 per gallon for distilled spirits, 40 cents to $1.20 per gallon on wine and 9 cents to 54 cents per gallon of beer.
“Alcohol should not be a sacred cow,” she said, adding that Maryland has some of the lowest alcohol taxes in the country.
Health organizations testified at a Feb. 6 Senate hearing in support of the tax hikes to raise money for health initiatives and to mitigate alcohol-related medical costs.
But Jay Hibbard, vice president of the Distilled Spirits Council of the United States, said the bill threatens several alcohol-related businesses in Maryland and that 1,900 residents could lose jobs in hospitality.
The Senate Budget and Taxation Committee said the increased cost for consumers under Forehand’s bill would be minimal, about 59 cents more per bottle of spirits, 16 cents more per bottle of wine and 4 cents more per can of beer.
According to the Department of Legislative Services, only about one third of bills introduced each session get passed – most die in committee.
Opponents of these vice taxes, like Bereano, contend they would ultimately cause the state to lose money as residents take their business elsewhere.
“There was enough tax damage done during the special session,” said Bereano, who lobbied against a dating services tax proposed in the last session. “I told them, ‘don’t tax love, you can’t tax love.’ And they didn’t.”
-30- CNS 02-15-08