Predictably, the tax-loving American Lung Association is pushing for a massive 75 percent increase in Maine's cigarette tax. They just think it's the cat's meow, curing all diseases while raising a boatload of money for state government to spend on pro-utopia policies.
Of course, that's not how these things tend to work themselves out. For starters, Maine desperately needs jobs. An excise tax increase of this magnitude certainly will not deliver. Convenience stores count on tobacco products for roughly one-third of their sales. Government driving up the cost of cigarettes won't help maintain payroll.
That's because higher taxes will only further fuel migration to New Hampshire, where consumers will be able to save over $12 per carton of cigarettes. New Hampshire also levies no sales or personal income taxes. To have any hope of competing with its neighbor, any talk of tax increases must be completely off the table.
That's why we're thankful for Governor Paul LePage. He has signed the Taxpayer Protection Pledge, a firm commitment to veto any tax increase that reaches his desk. In fact, LePage campaigned on cutting the cigarette tax, an acknowledgment that states compete for jobs and commerce — and Maine has been on the losing end in recent years.
ATR wrote a letter in opposition to any tobacco tax increases and in support of lifestyle tax cuts on tobacco and alcohol. To see it, see below. For a PDF, click here.
January 27, 2011
I write in strong opposition to a proposed tobacco tax increase in Maine. Voters sent a strong message to Augusta last November, urging responsible spending restraint in the wake of years of fiscal irresponsibility. A cigarette tax increase would hit small businesses and the poor during a period of sustained economic uncertainty.
Mainealready operates at a massive tax disadvantage to neighboring New Hampshire. New Hampshirelevies no taxes on personal income or sales, and its cigarette tax is the lowest in New England. A proposed $1.50 per pack increase in the cigarette tax would only exacerbate Maine’s tax gap. The impact will be absorbed by convenience stores, for whom tobacco products constitute nearly one-third of sales. When consumers are given the opportunity to save over $12 per carton by crossing the border into New Hampshire, Maine’s job providers will take a serious hit.
So state coffers. By increasing taxes on a declining revenue source, Maine can expect a serious shortfall. Such has been the case in other states: Between 2003 and 2007, over 70 percent of state cigarette tax increases failed to yield the projected revenue. Last year in Washington, D.C., a 50 cent per pack increase in the cigarette tax resulted in a 20 percent decrease in tax revenues.
I encourage you to adopt the position Gov. LePage advocated during last year’s campaign: a reduction in lifestyle taxes on tobacco and alcohol. These are among the least stable sources of revenue for state government. They are regressive, and explicitly drive commerce and jobs across state lines. It is time for Maine to compete with New Hampshire, rather than continue to export economic growth and prosperity.
Gov. LePage and many in the legislature have made a firm commitment to oppose all tax increases by signing the Taxpayer Protection Pledge. It would essentially be a waste of time and state government resources to pass any tax increase to the governor’s desk, as he has promised a veto. I would instead encourage you to couple necessary spending reductions with net tax cuts in order to restore Maine to competitive footing within New England.
If you have any questions or are interested in joining Gov. LePage in signing the Taxpayer Protection Pledge, please contact ATR state affairs manager Joshua Culling at [email protected].