Tax Update
Read Newest Articles: Tax Page 3
01/08/07
Concerning the additional cigarette tax that Baldacci wants to impose on Maine smokers, read just how much money Maine smokers are already contributing to the state’s economy:
Maine Information Tobacco Taxes Before the $2 dollar increase and before THIS increase Maine’s excise tax per pack of cigarettes: $1.000 Maine’s excise tax collection for the fiscal year ending June 2002: $95,006,000 Sales tax on tobacco products: 5.00% Federal excise tax per pack of cigarettes: $0.39 Total federal excise tax collections in fiscal year 2002: $7,512,700,000
Comparing Excise Taxes on Cigarettes, Beer and Wine Number of six-packs of beer that must be sold in Maine to produce the same state excise tax revenue generated by one carton of cigarettes: 50.8
Number of bottles of wine that must be sold in Maine to produce the same state excise tax revenue generated by one carton of cigarettes: 84.1 Master Settlement Agreement Payments To Date $182,122,188 has been paid to Maine since the Master Settlement Agreement was signed on November 23, 1998.
Maine smokers are paying for all the bans, control and restrictions against us just through our cigarette tax dollars! Yes, that’s right! Not the Maine Board of Health and not Partnership for a Tobacco Free Maine………but WE SMOKERS!
Instead of using our tax dollars for sick smokers, (should there be any), prescription drugs, education and sick kids………….Maine is using our cigarette taxes to fund “5” race cars teams and various race tracks across the states called Kick Butts Racing! Also, a little old lady in Ellsworth received a lot of cigarette tax dollars to plant a GARDEN in the center of town!!! We are also paying for those obnoxious ads on TV!
And the Governor and the lawmakers say they want a SMOKE FREE MAINE??!! Boy, is THAT ever a laugh!
Also, all the heads of Partnership for a Tobacco Free Maine are receiving cushy paychecks that SMOKERS are paying for! If all Mainers quit smoking, these people would be out of a job!!!
Remember: CIGARETTES DON’T PAY TAXES. SMOKERS PAY TAXES!
Darlene Brennan
Caribou, ME
Smokers angry over proposal for nation’s biggest cigarette tax
January 6, 2007
AUGUSTA, Maine –Maine public health officials like Gov. John Baldacci’s proposal for what would be the nation’s highest cigarette tax.
Predictably, smokers are far less enthusiastic.
Hallowell smoke shop owner Tom Allen said he’d prefer an increase in a broad-based tax — not one that singles out roughly 20 percent of the population.
“You are picking on the low-income, fixed-income people,” he said.
Baldacci wants to boost the cigarette tax by a dollar per pack. Lawmakers most recently increased the tax to $2 a pack in September 2005. If the new increase is approved, the tax would grow to $3 effective on July 1.
Dr. Dora Anne Mills, director of the Maine Center for Disease Control and Prevention, fully supports Baldacci’s proposal.
“The tobacco tax increase is one of the most effective public health strategies a state can implement,” she said.
Public health officials like Mills say raising the tax gives people incentive to quit.
“I think the governor is on the cutting edge here,” said Carol Kelly, director of the Maine Coalition on Smoking and Health.
Kelly said her group’s Washington, D.C., office estimates that an additional $1 per pack will keep 10,000 children from smoking.
“Kids are much more price-sensitive than adults,” she said.
It’s estimated that $65 million per year will be generated by the tax, which will go into the state’s General Fund.
By taking money from a different account, Baldacci also plans to increase spending on smoking-cessation programs. “There’s no question a tax increase of this size will once again produce unprecedented demand by people to quit,” Miller said.
As for smokers, they’re crying foul, saying they’re once again being singled out by a government that can’t control spending.
“I think it’s horrible,” said Kate Farrington of Augusta. “There’s enough things they can tax other than cigarettes.”
Budget Proposal
January 5, 2007
Governor John Baldacci today unveiled a six-point-four billion-dollar two-year budget package that would substantially boost funding for K-through-12 education while drastically reducing local layers of school system administration.The plan would also raise the state tax on a pack of cigarettes by one dollar, producing 66 million dollars a year and bringing the tax to three dollars – the nation’s highest among the states.
The governor’s General Fund proposal for the biennium beginning July First would create a Department of Commerce combining the existing departments of Economic and Community Development and of Professional and Financial Regulation. Aides said the proposal would eliminate about 165 state jobs, not all of which are currently filled.
Baldacci said his package contained “no fees, fines or any other adjustments,” except for a change in the method of apportioning corporate income tax that would net the state four million dollars a year.
New Cigarette Tax Predicted to Drop Sales
By Victoria Wallack
September 15, 2005
September 15, 2005
The state anticipates a 12 percent drop in sales when the cigarette tax goes from $1 to $2 a pack next Monday, but is still expecting to raise $70 million annually in new tax revenue to help balance the budget.
The one wild card in the mix is a petition drive being led by Stavros Mendros, a former state represen-tative from Lewiston, who said Tuesday he believes he has the needed 50,519 signatures to put the cigarette tax on the November ballot. If his signatures are handed into the Secretary of State’s office by Friday and validated, that would put the tax on hold until the voters decide.
“I feel we’re over the 50,000 mark,” Mendros said. He said his petition circulators have gathered signatures at more than 100 stores, largely in southern Maine. “They’re certainly going to be hit a lot harder by this tax,” than the rest of the state, he said, because people looking to buy cigarettes near the border will go to New Hampshire.
While some have criticized the hike as a tax on the poor since a higher percentage of low-income people smoke, others say the tax increase could be a win-win for the state. It will raise revenue while encouraging folks to kick the habit.
Bureau of Health statistics say 23.8 percent of adults and 20.5 percent of high school students in Maine smoke. They burn through 92 million packs of cigarettes a year.
Each one of those packs would have to carry an $8 tax to pay for the health care costs related to smoking, according to Dora Mills, director of the Maine Bureau of Health.
“At a couple of dollars per pack… it’s not a pay as you go” tax, Mills said.
Her department is planning some commercials that “recognize as a result of tobacco costing more, people may want to quit now,” Mills said. The commercial doesn’t specifically mention the $1 hike or that it goes into effect Sept. 19, but tells people where to get help.
“It doesn’t say, ‘hey the tax is going up.’ We don’t really shout that,” Mills said. Rather it alludes to the rising price of tobacco and advertises the help line, which is 1-800-207-1230.
Mills rejects the notion the state is trying to have it both ways by making more money off smokers at the same time her department is trying to get them to quit.
“It doesn’t hold water because one of the chief reasons that the state of Maine is having difficulty balancing its budget is because of health care costs,” she said, and that is true of other states and the U.S. government.
“If we reduced our smoking rate our health care costs should go down,” she said, and “we don’t have to be as reliant on tobacco taxes.”
Becky Smith of the Maine Coalition on Smoking or Health, whose organization was pushing for $1.50 hike in the tax, said the $1 increase will have the most impact on young smokers because they don’t have the money to spend. A pack of Marlboro cigarettes – a popular brand among young people – already costs $4.24 at the supermarket before the new tax.
Her organization is predicting 8400 adults will quit and 13,800 young people will stop or never start the habit. As for fears that it will simply send people over the border into New Hampshire to buy their cigarettes, Smith said that didn’t happen the last time the price went up. That was in 2001 when the tax increased 26 cents, to $1 a pack.
“When Massachusetts increases their tax, there’s a sales spike in New Hampshire,” but that was not the case for Maine in 2001, she said, largely because most of the state is far from the border. New Hampshire charges 80 cents a pack in state tax.
And, while $1-a-pack hike is considerable incentive, “With the price of gas, I don’t see people driving very far to buy cigarettes,” she said.
Jerry Stanhope of the Maine Department of Revenue said the department estimates a 12 percent drop in the sales of cigarettes, and includes in that number those who quit, cut back or get their cigarettes someplace else.
The department uses a sales and excise tax “micro-simulation model” that forecasts what is going to happen to sales if you increase the price of a product, Stanhope said. “It has behavior built into it based on national statistics.”
Even with the 12 percent sales drop, Stanhope said the forecasting model shows the tax hike will raise an additional $51.3 million in this fiscal year and just under $70 million next year when the new tax will have been in place for a full 12 months. That’s on top of the more than $90 million cigarette sales already bring in. Then there will be additional sales tax revenue or 5 cents per pack more based on the $1 hike in the price.
“It’s a tax on a tax,” Stanhope said.
Buck a pack translates into gain of $46 million
June 26, 2005
By KELLEY BOUCHARD, Portland Press Herald Writer
By KELLEY BOUCHARD, Portland Press Herald Writer
One of the most telling aspects of the pending increase to Maine’s cigarette tax is how much money the state expects to collect from it.
Revenue officials calculate that doubling the $1 excise tax will raise $142.8 million in fiscal 2006. That’s $46 million more than the tax brought in this year and enough to save lawmakers from having to borrow money to balance the state budget.
The total take from the cigarette tax is expected to reach $163 million by fiscal 2007.
Although millions of additional dollars should roll into state coffers, cigarette sales are expected to decrease initially when the tax increases from $1 per pack to $2 on Sept. 19. Some people will quit smoking. Others will start rolling their own. Some may drive to New Hampshire, where cigarettes are cheaper and the excise tax is lower.
Anti-smoking advocates lobbied for the tax hike as a way to encourage smokers to quit and hopefully reduce Maine’s skyrocketing health-care costs. Democratic lawmakers embrac- ed the increase as a one-step solution to the state’s budget problems.
Cigarette smokers and retailers say they were singled out because they’ve become social pariahs. They say it was easier to raise the cigarette tax than to increase other taxes that would have drawn stronger opposition. They say it’s disingenuous for legislators to claim that the tax is meant to encourage people to give up cigarettes.
“It was a quick fix for the state,” said Peter DiPietrantonio, owner of Three D’s Variety Store in Biddeford. “I don’t believe they want people to quit smoking. They want their money.”
Three D’s is one of the largest cigarette retailers in Maine. Each year, the Main Street store generates about $500,000 for the state through the excise tax. When the tax goes up in September, DiPietrantonio figures his sales will decline slightly.
He believes some people will drive to New Hampshire or buy cigarettes via the Internet, where they are sold tax-free for as little as $1.50 per pack. Distributors and retailers also may increase their prices to offset lost sales.
Ultimately, he said, smokers will foot the bill for the Legislature’s spending plan, and many of them cannot afford it. In 2003, the median household income for Maine smokers was $29,352, compared to $43,070 for nonsmokers, according to the R.J. Reynolds Tobacco Co.
“People are having a hard time paying the tax now,” DiPietrantonio said. “Obviously, we’re going to lose business. And you’re going to hit poor people the hardest.”
State Rep. Joseph Brannigan, D-Portland, is a member of the appropriations committee that recommended the tax increase. He acknowledges the duality of taxing a legal product and hoping that people will stop using it. He also admits that it targets some people who can least afford it.
Brannigan is executive director of Shalom House, a social service agency that provides housing and programs for mentally ill adults. Shalom House is stepping up its stop-smoking efforts, knowing that the tax hike is coming and many of its clients are smokers.
“It’s going to be tough on the people we serve because many of them are very poor,” Brannigan said.
“No tax is easy. But it was one that was straightforward and we had a lot of people encouraging us to pass it. . . . We thought this was something that would be acceptable. It filled the bill for what we needed.”
Maine receives about $50 million a year from the 1999 federal tobacco settlement, which is funded by the tobacco industry. About $14 million of that goes to tobacco prevention and treatment programs.
One group that promoted the tax increase is the Maine Coalition on Smoking or Health. Headed by Carol Kelly of Portland, the coalition lobbied legislators to view the increase as a way to offset the estimated $554 million in annual health-care costs related to smoking. Much of that cost is subsidized by taxpayers.
“This is a tax we can all afford,” Kelly said. “Smokers will quit, kids will be less likely to start and it will reduce health-care costs in the long run.”
Kelly sees the cigarette excise tax as a health user fee. She believes the $1 increase will result in 22,000 fewer smokers in Maine and save the health-care system $292 million annually. She bristles at those who describe it as a “sin tax,” a traditional term for alcohol and tobacco taxes.
“This is not about punishing behavior,” Kelly said. “The tobacco industry is spending $62 million each year promoting tobacco use in Maine. We know that seven out of 10 smokers want to quit. Our hope is that increasing the price could be the final push to get them to quit.”
Kelly said she’s aware that more people may switch to rolling their own cigarettes, and her group may encourage the Legislature to increase taxes on loose-leaf tobacco as well.
But she disputes store owners who claim that increasing the cost of cigarettes here leads Mainers to buy them in New Hampshire, where the excise tax will soon increase to 80 cents per pack. She said Maine’s excise tax increases in 1991, 1997 and 2001 didn’t boost New Hampshire cigarette sales.
“This is about encouraging a choice that most smokers are on the verge of making anyway,” Kelly said. “Smoking is the No. 1 killer in Maine, and we know that this is going to help reduce health costs.”
Kelly’s rationale doesn’t sit well with Darlene Brennan of Caribou, regional director of The Smokers’ Club, a national smokers’ rights group. She sees state governments across the country counting on cigarette taxes to fund public services. She warns elected officials that the 22 percent of Maine adults who smoke will remember how they voted on the cigarette tax come election time.
“Across the country, state budgets cannot live without taxing smokers,” Brennan said. “You can’t have it both ways. Either ban smoking and find something else to tax or leave us alone.”
Staff Writer Kelley Bouchard can be contacted at 791-6328 or at:
kbouchard@pressherald.com
http://pressherald.mainetoday.com/news/state/050626cigtax.shtml?survey81631
http://pressherald.mainetoday.com/news/state/050626cigtax.shtml?survey81631
Fuming over tax
June 26, 2005
By KELLEY BOUCHARD, Portland Press Herald Writer
By KELLEY BOUCHARD, Portland Press Herald Writer
Benjamin Snow started smoking as a teenager.
Now 49, he thinks about quitting every day, but he doesn’t plan to do so anytime soon, even as Maine prepares to increase its excise tax from $1 per pack to $2 to help balance the state budget.
Snow, who lives in Portland, smokes a pack a day and says he can afford the extra $7 a week, or $365 a year.
But he wonders about the smokers who can’t, calling the cigarette tax regressive because smokers tend to have lower incomes than nonsmokers. He also found it hypocritical that some lawmakers justified the increase by saying it would encourage smokers to quit.
“It’s duplicitous,” Snow said. “I question their priorities and their intent.”
The tax increase, which starts Sept. 19, is expected to raise an additional $46.8 million during the coming fiscal year and eliminate the need for the Legislature to borrow money to fund state government. The increase targets the estimated 22 percent of adult Mainers who smoke.
Snow, who is Portland’s marine operations manager, believes legislators took the easy way out. He figures they chose to raise the tax on a legal product that has been demonized in the last decade. It was easier, he said, than reducing state spending or increasing other taxes – sales, corporate, real estate – that are opposed by strong lobbies.
To him, raising the cigarette tax to rescue the state budget is bad public policy.
“Why would you base the economy of your household, your business or your government on the behavior of addicts?” Snow said. “It doesn’t make sense. What if we all quit? It’s just not responsible. We’re living beyond our means, there’s no question about that.”
Snow and other smokers wonder what would happen if the Legislature tried to levy an excise tax on coffee or scratch tickets or any other more acceptable habit. They figure nonsmokers should be concerned that one of their favorite activities will be targeted next.
“It’s a very slippery slope we’re on. Just because it’s not their ox that’s being gored,” said Rose Kouroyen, 58, of Bangor. “When does it stop? When do they stop trying to control people’s lives with the tax code?”
Kouroyen and her husband, Stephen, 61, say they are resisting what she calls the “jihad” against smokers, and that they’re willing opponents of the “partnership for a smoke-free universe.”
They decided to fight back three years ago, when they started rolling their own cigarettes. It takes about five minutes to roll 20 cigarettes using a metal machine, paper tubes with filters and loose-leaf tobacco, which costs about $15 for a pound bag. Each pack they roll costs about 85 cents – far less than Maine’s average retail cost of $4.47 per pack.
“We started rolling our own when (the tax) got too onerous,” she said.
Rose Kouroyen, who is a bookkeeper, started smoking when she was 11. Stephen Kouroyen, who is a carpenter, started when he was 10. They dispute studies that tout the cost of smoking-related illnesses on the American health-care system. They say nonsmokers wind up costing the system more because they live longer.
“People should be thankful because we drop dead earlier,” Rose Kouroyen said, her voice tinged with sarcasm.
“Life is full of risks,” she continued. “We all choose our own path in the inexorable march toward death. It’s nobody else’s business what I do with my own life.
“I just had a physical. Perfect heart. Perfect blood pressure. My doctor said to me, ‘You obviously take good care of yourself.’ Smoking probably isn’t the healthiest thing you could do, but not everyone is a yogurt-eating runner.”
Rose said she considered growing her own tobacco, which is catching on in other parts of the country. Instructions are featured on several smokers’ rights Web sites. Growers must wear long sleeves and pants to prevent skin contact with tobacco’s irritating itch. They also need significant space to process and cure the leaves.
“If it weren’t so much trouble, I probably would grow it,” she said. “I have enough trouble growing tomatoes.”
Not everyone is so eager to fight.
Bob Mills, who lives in Biddeford, used to be a heavy smoker. He’s down to two or three packs a week and calls himself a social smoker. He sees the cost of everything going up, including gasoline, and he’s ready to cry uncle. He says the pending cigarette-tax increase may inspire him to quit smoking altogether.
“It’s like I want to quit driving,” said Mills, a 40-year-old property manager. “Everything’s going up and this is one way I can save some money. I also don’t want to support the tax because I feel I’m overtaxed now.”
He said recent bans on smoking in restaurants, bars and other public places, along with the state’s anti-smoking campaign, may encourage his decision.
“You’re already having to smoke near the Dumpster,” he said. “You’re pretty much ostracized if you smoke.”
Snow doesn’t plan to quit, or grow his own, or drive to New Hampshire, where cigarettes cost less and the excise tax is lower. He already spends about $35 a week on cigarettes, and he’s prepared to shell out another $7 come September.
Still, he’s offended by the prospect of paying more for something he has the right to do.
“At the end of the day, smoking is a legal activity,” Snow said. “In a society where we have freedom of choice, we should be allowed to do it and not be penalized for it.”
Maine has passed a bill to hike cigarette taxes again. The lawmakers doubled it. 1 November the tax increase will go into effect.
It was $4.19 up to $5.19 a pack. This will put a $10 dollar tax on a carton.
Aren’t smokers sick and tired of carrying the weight of the state budgets yet?
Maine: Panel OKs $1 tax hike on cigarettes
http://www.freerepublic.com/focus/news/1423234/posts
http://www.freerepublic.com/focus/news/1423234/posts
Darlene Brennan – The Smoker’s Club, Inc. – New England Regional Director
The United Pro Choice Smokers Rights Newsletter – http://www.smokersclubinc.com
Maine Smokers Rights – http://www.geocities.com/shelioness/mainerights.html
mailto:darlene@maine.rr.com – Respect Freedom of Choice!
The United Pro Choice Smokers Rights Newsletter – http://www.smokersclubinc.com
Maine Smokers Rights – http://www.geocities.com/shelioness/mainerights.html
mailto:darlene@maine.rr.com – Respect Freedom of Choice!
http://janus.state.me.us/legis/LawMakerWeb/billtextsearch.asp
LD# 1617
Emergency preamble. Whereas, acts of the Legislature do not become effective until 90 days after adjournment unless enacted as emergencies; and
LD# 1617
Emergency preamble. Whereas, acts of the Legislature do not become effective until 90 days after adjournment unless enacted as emergencies; and
Whereas, the health of the citizens of the State of Maine is of paramount interest; and
Whereas, this legislation provides a source of funding for health care programs integral to the health of Maine citizens; and
Whereas, in the judgment of the Legislature, these facts create an emergency within the meaning of the Constitution of Maine and require the following legislation as immediately necessary for the preservation of the public peace, health and safety; now, therefore,
Be it enacted by the People of the State of Maine as follows:
Sec. 1. 36 MRSA §4365, as amended by PL 2003, c. 705, §6, is further amended to read:
§4365. Rate of tax
A tax is imposed on all cigarettes imported into this State or held in this State by any person for sale at the rate of 47 125 mills for each cigarette. Payment of the tax is evidenced by the affixing of stamps to the packages containing the cigarettes.
Sec. 2. 36 MRSA §4365-E, as enacted by PL 2001, c. 439, Pt. SSSS, §2, is repealed.
Sec. 3. 36 MRSA §4365-F is enacted to read:
§4365-F. Application of cigarette tax rate increase effective
July 1, 2005
July 1, 2005
The following provisions apply to cigarettes held for resale on July 1, 2005.
1. Stamped rate. Cigarettes stamped at the rate of 50 mills per cigarette and held for resale after June 30, 2005 are subject to tax at the rate of 125 mills per cigarette.
2. Liability. A person possessing cigarettes for resale is liable for the difference between the tax rate of 125 mills per cigarette and the tax rate of 50 mills per cigarette in effect before July 1, 2005. Stamps indicating payment of the tax imposed by this section must be affixed to all packages of cigarettes held for resale as of July 1, 2005, except that cigarettes held in vending machines as of that date do not require that stamp.
3. Vending machines. Notwithstanding any other provision of this chapter, it is presumed that all cigarette vending machines are filled to capacity on July 1, 2005 and that the tax imposed by this section must be reported on that basis. A credit against this inventory tax must be allowed for cigarettes stamped at the rate of 50 mills per cigarette placed in vending machines before July 1, 2005.
4. Payment. Payment of the tax imposed by this section must be made to the State Tax Assessor by October 1, 2005, accompanied by forms prescribed by the assessor.
Sec. 4. 36 MRSA §4366-A, sub-§2, A and B, as enacted by PL 2001, c. 439, Pt. SSSS, §3, are amended to read:
A. For stamps at the face value of 37 50 mills sold through September 30, 2001, 2.5% June 30, 2005, 2.03%; and
B. For stamps at the face value of 47 125 mills sold prior to July 1, 2002, 2.16%; and on or after July 1, 2005, 1.15%.
Sec. 5. 36 MRSA §4366-A, sub-§2, C, as enacted by PL 2001, c. 439, Pt. SSSS, §3, is repealed.
Sec. 6. 36 MRSA §4366-D, as enacted by PL 2001, c. 450, Pt. D, §1, is repealed.
Sec. 7. 36 MRSA §4385 is enacted to read:
§4385. Distribution of cigarette tax revenue
A portion of the revenue generated from the tax imposed pursuant to section 4365 must be allocated annually by the Commissioner of Health and Human Services to the health-related purposes specified in this section.
1. Partnership for a Tobacco-Free Maine and Healthy Maine Partnerships. To support the work of the Partnership for a Tobacco-Free Maine and the Healthy Maine Partnerships, or their successor programs, $14,837,000 of the revenue generated pursuant to section 4365 must be distributed annually to the following programs in the following amounts:
A. To create and maintain a website for interactive tobacco treatment counseling, $250,000;
B. To enhance administration and enforcement of existing state programs to prevent youth in the State from gaining access to tobacco and to protect them from exposure to secondhand smoke, $457,000;
C. To increase the number of school health coordinators across the State, $11,630,000; and
D. To cover the costs associated with the recommendations of the Commission to Study Public Health related to encouraging healthy diets and physical fitness among youth, including educational campaigns, $2,500,000.
2. Community-based programs. To enhance community-based disease prevention and health promotion, $11,660,000 of the revenue generated pursuant to section 4365 must be distributed annually to the following programs in the following amounts:
A. To increase the number of school-based health centers across the State, $2,160,000;
B. To provide primary health care to low-income uninsured and underinsured patients in medically underserved areas of the State, $3,000,000; and
C. To implement the disease prevention and health promotion provisions of the State Health Plan described under Title 2, chapter 5 at the community level, $6,500,000.
3. Other. The sum of $50,000,000 from revenue generated pursuant to section 4365 must be distributed annually to health-related programs other than those listed in subsections 1 and 2, including for support and stabilization of MaineCare.
Emergency clause. In view of the emergency cited in the preamble, this Act takes effect July 1, 2005.
SUMMARY
This bill increases the cigarette excise tax from $1 to $2.50 per pack and allocates the new revenue to a variety of health-related purposes. It also reduces accordingly the percentage discount paid to distributors for tax stamps that the distributors purchase and affix.
Everybody’s favorite tax
Thursday, June 16, 2005
Editorial:
Editorial:
By the time you read this, the Legislature will have moved closer to wrapping up the state’s budget affairs with a lash-up of spending cuts and tax increases, among which the cigarette tax is the popular leader.
Every tax or spending item put on the table has been bitterly contested except for the tax on tobacco, everybody’s favorite levy. As the session winds down, about the only controversy involving the cigarette tax has been whether to raise it by $1 or $1.50 per pack.
Call it a Panglossian tax, full of “best of all possible world” positives.
Dr. Pangloss was the ineluctable professor of optimism in Voltaire’s “Candide,” who believed simply that since everything had a purpose, all things and developments were for the very best. For example, he declared, the nose was created for the purpose of wearing spectacles.
Likewise, Maine political leaders would have us believe the cigarette tax was invented for the purpose of correcting society’s bad habits.
This tax, in the view of its many enthusiasts, not only would raise millions in new revenue but would help to discourage smoking, particularly by young people, at the same time. What’s not to like about it?
Several years ago, I wrote a column about this idea, suggesting that in the end it was a self-defeating tax policy. It could raise money for the state or reduce the volume of smokers, I wrote, but it could not do both simultaneously.
I got a ton of letters explaining how I was wrong about this: If you double the cigarette tax rate (which they did at that time from 37 to 74 cents a pack) and lose, say, 20 percent of smokers (they actually lost 17 percent) the mathematics works out well in both directions — more revenue, fewer smokers.
Fair enough, but if the tax rates get outrageously high enough, eventually the figures have got to start moving into the debit column in both categories.
My other point in that long-ago column was that the power of taxation really ought to be used primarily to raise revenue in support of important public programs, not to regulate the personal behavior of any particular class of people.
In 1819, a year before Maine became a separate state, U.S. Chief Justice John Marshall issued a court ruling containing his famous observation that “the power to tax involves the power to destroy.”
Is it proper to use that destructive power against behavior that is legal, in this case smoking, no matter that society in general might disapprove of it? Is it proper to do so even as government profits from the continuation of the disapproved practice?
Just now, cigarettes cost roughly $4.50 a pack, with $1 of it going to the state. That is a tax rate of more than 20 percent. A $1 increase on top of that makes it more than 35 percent. An increase of $1.50 brings it to more than 40 percent.
That moves the cigarette tax — and the moral authority of the state — past the point of burdensome into the range of destructive. Where is the morality in using the power of taxation to restrict to wealthier folks a perfectly legal personal indulgence?
And even if the tax were applied strictly to produce revenue, not to change individual behavior, where is the fairness in taxing one retail product at 35 percent to 40 percent while the general sales tax stands at a mere 5 percent?
Incidentally, in North Carolina, a big tobacco-growing state, the per-pack tax on cigarettes is just 5 cents, which is actually lower than that state’s 4 percent sales tax. That is the lowest rate anywhere in the nation.
With taxation, self-interest is often a matter of special interests, and there are not many tobacco growers in Maine. There are still a lot of addicted smokers, but they are a distinct minority and therefore easy targets for burdensome tax policies.
As a longtime, pack-a-day smoker who, like Mark Twain, gave it up a thousand times before finally quitting for good two decades ago, I am personally unaffected by such policies.
As an ordinary person, however, I am disturbed by the use of taxation powers to affect behavior among the poorer members of society.
An outright prohibition against smoking is not in the cards, but at least it would be more direct than the incremental tax-increase approach.
For the time being, it is still possible for lawmakers to raise new revenues and discourage smoking simultaneously. But it is not possible to do so fairly and honestly.
Jim Brunelle of Cape Elizabeth has commented on Maine issues for more than 40 years. He can be reached at jbrune@maine.rr.com.
http://kennebecjournal.mainetoday.com/view/columns/1708500.shtml
http://kennebecjournal.mainetoday.com/view/columns/1708500.shtml
Panel OKs $1 tax hike on cigarettes
Dems propose $125M in cuts
June 15, 2005 – Bangor Daily News
AUGUSTA – Majority Democrats on the Legislature’s Appropriations Committee repealed a $250 million, budget-balancing loan Tuesday, replacing it with $125 million in spending cuts and a $1 hike in the state cigarette tax.
At $2 per pack in taxes, Maine would have the third highest cigarette tax in the country, according to Dan Riley, an Augusta-based lobbyist for the tobacco industry. The increase would effectively drive up the over-the-counter price for a pack of premium cigarettes like Marlboro from $4.19 to $5.19.
“We have selected some new revenue to bring us to the $250 million target,” said Sen. Peggy Rotundo, D-Lewiston and co-chairman of the Appropriations Committee. “We cut as far as we felt we could.”
Gov. John E. Baldacci said Tuesday he will support the cigarette tax increase as the best available solution to eliminating the $250 million state revenue bond included in the two-year, $5.7 billion state budget to take effect July 1. Like the 8-5 vote on the budget panel Tuesday, the state budget was advanced in March by majority Democrats who believed the $250 million loan was an acceptable alternative to deep spending cuts in state programs.
The proposal now goes to the printer, where it will be assigned an LD number. Legislative leaders essentially abandoned a planned Wednesday adjournment and anticipated debate on the new tax-and-spending package would begin sometime Thursday in the House.
Republicans on the panel have prepared their own proposal to reach the $250 million target that relies on severe cuts to state health care services and defers salary increases to state employees. The package also restores numerous proposals that were rejected by Democrats on the Appropriations Committee.
“A lot of our initiatives are about the size of state government and the costs associated with state employees,” said Sen. Richard Nass, R-Acton and the senior Republican on the budget panel.
Republicans were essentially bypassed by Democrats in March when the majority budget was passed. The GOP responded by launching a people’s veto of the borrowing component with the hope of overturning the provision at the ballot box in November. About 40,000 of the required 51,000 signatures have been gathered, according to Sen. Peter Mills, R-Skowhegan. In response to Tuesday’s vote by the Appropriations Committee, Mills indicated final approval by the Legislature of either proposal to eliminate the borrowing provision of the budget was all that was needed to terminate the people’s veto effort.
“When it looks like this has passed in the House and Senate, we’ll declare victory and the signature-gathering effort will stop,” Mills said.
In a closely divided House and Senate, however, such conclusions cannot be presumed lightly. Republicans and some Democrats were not sure how the majority report from Appropriations would be received by rank-and-file Democrats in the House. The Democratic plan:
. Cuts $10.4 million from mental health programs by revamping the delivery of those services.
. Saves $5.9 million by delaying school construction projects by one year.
. Cuts $2.2 million from the DirgoHealth program.
. Cuts $5.5 million from the Veterans Tax Reimbursement program.
. Cuts about $7.2 million from the Business Equipment Tax Reimbursement program.
By contrast, the GOP plan:
. Delays $20 million in state employee salary increases until the next budget cycle.
. Cuts $20 million in health care services to poor working Mainers.
. Transfers $32 million from the DirigoHealth program to the General Fund, leaving DirigoHealth with a balance of about $6 million.
. Eliminates the governor’s Office of Health Policy and Finance with a $2 million deappropriation.
. Eliminates the reduction to the BETR program proposed by Democrats.
Rotundo said Democrats could not support the level of cuts Republicans wanted to make to the state’s social service programs.
“In order to cut more we were going to have to get into those programs that provide health insurance for some of the poorest people in the state – the working poor,” she said. “We just didn’t want to go there. We did not want to remove thousands of people from programs that were providing them with some kind of health care.”
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Cigarette tax bills to target Net sales
Mainers can expect to pay interest also
Mainers can expect to pay interest also
May 23, 2005
By Meg Haskell, Of the NEWS Staff
AUGUSTA – By the end of the year, an estimated 5,000 to 6,000 Mainers will receive a letter from Maine Revenue Services billing them for sales and cigarette taxes for smokes they bought on the Internet from companies across the country.
“We are gearing up to send letters to everyone we have identified from sales records by the end of the year,” Errol Dearborn, director of compliance at Maine Revenue Services said last week. “We won’t know for sure how many letters we will be sending until we get all of the sales records.”
With Maine’s tax on cigarettes at a dollar a pack, the tax bills going to buyers could be significant, he said. In addition to the specific tax on cigarettes, Maine also assesses the 5 percent sales and use tax on cigarettes.
“We will be billing for both taxes that are due and the interest from when they bought the cigarettes,” Dearborn said.
He estimates the state will collect at least $250,000 from the effort that got under way six months ago. Under federal law, Maine can get the sales records of Internet sellers by going to court. The state is also benefiting from similar enforcement efforts in other states.
For example, Virginia recently prosecuted two online cigarette companies and discovered that sales from just those two companies cost 46 states more than $2 million in revenue. They sent the sales records to other states that have stepped up their efforts to collect the taxes.
“I expect we will get hammered when people start getting these letters,” said Sen. Joe Perry, D-Bangor. Perry is the co-chairman of the Legislature’s Taxation Committee.
“I think it is important for people to know that when they buy cigarettes from out of state, they still owe the taxes on those cigarettes. People will be upset, and I know I will be getting calls, but the taxes are due and Maine Revenue Services is doing their job.”
But the effort has its critics, both in Maine and nationally. Sen. Jonathan Courtney, R-Sanford, said he opposed the stepped-up enforcement efforts when the tax committee discussed them last year.
“We didn’t think the way to balance the governor’s budget was on the backs of people harassed by Maine Revenue Services,” he said. “They are under tremendous pressure to find every dollar they can from whatever rock they can turn over.”
Courtney said he has no doubt people will complain to lawmakers when they receive the bills from the state, and he said they are right to complain.
Grover Norquist, president of Americans for Tax Reform, blasted enforcement efforts under way in Michigan in a release earlier this year. The Michigan effort is similar to Maine’s and those in several other states. He said the state was resorting to “police state tactics” to get additional tax revenues.
One part of the effort that has proved controversial in other states is that the tax bill has been compounded by penalties as much as 100 percent of the tax and interest due. Dearborn said Maine is billing for taxes due plus interest. He said a decision to levy penalties would be made at a “higher level” in MRS.
“I think there are some real issues when people are unaware of a tax,” said Rep. Richard Woodbury, an independent from Yarmouth. Woodbury is co-chair of the Legislature’s Taxation Committee. “As a state, I think we have to be really careful about imposing penalties on people that do not realize they are required to pay a tax.”
Perry agreed. He said that MRS needs to “go real slow” on imposing penalties on top of what are going to be tax bills that will shock many that receive them.
“We are talking about more than $12 a carton [in taxes],” he said. “That is going to really add up for someone that is a heavy smoker.”
The states got a boost earlier this year in their efforts to curb online sales when the credit card industry agreed to stop allowing the use of credit cards for the purchase of tobacco products over the Internet.
Dearborn said it would be very difficult to reach all of the Internet sellers even with the cooperation of other states and the federal government. He said many sites “fold up” after a state or the federal government moves to get their records.
“They very quickly set up another Web site and are right back at selling cigarettes,” he said.
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Baldacci to promote new budget talks
May 12, 2005
By Francis X. Quinn, Associated Press Writer
By Francis X. Quinn, Associated Press Writer
AUGUSTA, Maine — Gov. John Baldacci is expected to open the door wider to new budget talks Friday when he outlines a package of follow-up spending adjustments.
The so-called Part 2 Baldacci budget package is to include spending reductions as well as payments to 12 hospitals to make up for payment shortfalls dating back a dozen years, according to administration sources.
Offering indirectly a renewal of earlier budget discussions, Baldacci plans to detail the need for a contingency plan “as a precautionary measure” in the face of a potential people’s veto of a $450 million borrowing provision in the $5.7 billion two-year state spending package enacted earlier this year.
“If it becomes a vehicle for other kinds of things, it will be,” Baldacci said Thursday.
The governor said his new package, designed to address more than $100 million in state and federal funding for hospitals as well as a federal reimbursement rate reduction costing the state $73 million, would be “consistent” with the approach in his big budget package of curbing Maine’s tax burden, protecting health care and promoting economic growth and jobs.
A Republican legislative leader said Thursday he was increasingly optimistic over the possibility of new budget talks.
House Minority Leader David Bowles, R-Sanford, said he believed Democrats and Republicans were “getting close to some kind of framework where we can sit down and negotiate a replacement for the borrowing piece in the budget.”
Bowles qualified his optimism –“nobody’s flat-out said it” — but added that a successful renegotiation of the contentious borrowing provision could moot a smoldering referendum campaign now in its early stages.
“The people’s veto would no longer have any reason to go forward,” Bowles said.
On March 31, Baldacci held a signing ceremony to mark the passage of a biennial budget that he said would provide property tax relief by providing local schools with an additional $250 million.
Democratic majorities had pushed through a reworked version of the governor’s original plan that still avoided increases in broad-based taxes but scrapped a lottery securitization scheme in favor of a $450 million revenue bonding plan.
Less than two weeks later, five Republican lawmakers joined in the first formal step toward challenging the borrowing provision, going to the secretary of state’s office to begin the process of mounting a people’s veto that would entail gathering more than 50,000 petition signatures by June 28.
Since then, Democrats have stepped up their demands for Republicans to produce a budget alternative while Republicans, who at one time proposed a continuing resolution to guarantee current levels of funding for state government while budget deliberations were extended, have complained they were shut out of shaping the final budget package.
Last week, Democratic lawmakers held a news conference and gave the Republicans until Friday to put forth their own plan. Bowles said Thursday that Republicans would address the issue Friday morning.
Appropriations Committee members already once in public session have explored the possibility of reopening their earlier budget talks. No resolution came at the committee level and House and Senate leaders from both parties have been noncommittal or dismissive.
The potential of a people’s veto has been cited by Baldacci administration officials and State Treasurer David Lemoine as another hurdle that the state would need to overcome to allay Wall Street rating agencies eyeing the state warily.
Lemoine accompanied Baldacci to New York this week and joined later with administration financial officials for talks in advance of possible rating adjustments.
As two legislative committees heard testimony Thursday on the potential effects of a cigarette tax increase, Baldacci health policy chief Trish Riley told The Associated Press that “the administration is not ready to embrace a cigarette tax.”
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Health advocates ask for $1.50-per-pack cigarette tax increase
March 16, 2005
AUGUSTA, Maine — Anti-smoking advocates came to the State House on Wednesday to ask lawmakers to increase Maine’s cigarette tax by $1.50 cents a pack, which they said would give Maine the highest cigarette tax in the nation.
But leaders of the Maine Coalition on Smoking Or Health acknowledged they have no bill in the Legislature to raise the tax from $1 to $2.50.
Coalition leaders said the higher tax would make cigarettes increasingly difficult to buy, especially for youths.
They estimated the tax would decrease the youth smoking rate by more than 20 percent, resulting in 20,700 fewer smokers and $331 million in long-term savings of medical costs for treatment of smoking-related diseases.
Advocates want the new taxes to go to anti-smoking and health-related programs.
“The health and economic impacts of a $1.50 increase will be tremendous,” Dennise Whitley of the American Heart Association, one of the coalition members, said at a news conference.
The coalition pointed to a survey it said shows broad-based support for its proposal.
Gov. John Baldacci said that if a bill to raise the tax came forward he would be glad to review it, said spokesman Lynn Kippax.
“He is interested in anything to keep Mainers healthy, but he’s also pledged not to raise taxes,” said Kippax.
Maine last increased its cigarette tax by 26 cents a pack in 2001, bringing it to $1 per pack. The last previous increase was in 1998, when the tax was doubled to 74 cents.
