ANNAPOLIS, Md. -- This past Sunday, Maryland tobacco retailers were confronted with an extreme rise in taxes on little cigars and smokeless tobacco. Passed by the Maryland General Assembly, the increases will catapult Maryland’s tax rate to the 10th highest in the country.
Anti-smoking advocates fought to bring little-cigar and smokeless-tobacco taxes in line with the 2007 doubling of the cigarette tax from $1 to $2. Little cigars were hit the hardest, with taxes quadrupling from 15% to 70% on the dollar. Other tobacco products, including smokeless, also face a severe price escalation, with their rate doubling from 15% to 30%. State officials predict the new tobacco taxes will generate $5 million in the first year, although they admit the revenue will likely decline in upcoming years.
However, supporters of the measure argue the tax increase was not about raising state revenue. According to proponents, the legislation is aimed at decreasing the number of underage smokers in Maryland. Vincent DeMarco, president of the Maryland Citizens’ Health Initiative, said such legislation could “save thousands of young people from addiction to these deadly products.
In an interesting turn, premium cigars were exempt from the higher tax rates and will continue to be taxed at the current rate of 15%. This is no coincidence, according to the International Premium Cigar & Pipe Retailers Association, which represents 35 Maryland tobacco retailers.
"You don't see a high-schooler or a middle-schooler standing on the corner with a $15 cigar sticking out of his mouth. It just doesn’t happen," said the organization’s CEO, Bill Spann.
Despite the reprieve for premium cigars, Maryland tobacco retailers worry such drastic changes in price could drive customers to go elsewhere for their tobacco needs. Only a short drive away, Delaware boasts a consumer-friendly 15% tax on cigars, smokeless and all other tobacco products. Only time will tell if the higher tax rates will affect sales in Maryland.