Maryland Comptroller William Donald Schaefer declared his support for a $1 per-package increase in the tax on cigarettes yesterday and pledged to redouble efforts to prevent smuggling, which opponents of the increase say is certain if the tax is raised.
If the increase is approved, Maryland smokers would face a total tax of $1.36 a package -- and have a new incentive to shop in Virginia where the levy is 2 cents a package.
Opponents have been using that suggestion as leverage for votes against the measure.
Though it must cross difficult legislative terrain, the bill is thought to have its best chance of passing. The specter of smuggling has helped opponents kill big tax increases or reduce their size in recent years.
Schaefer's endorsement -- and his promise of diligent anti-smuggling measures -- could be a boost for the tax increase proposal as it heads for critical tests in the House of Delegates and the Senate.
"After careful consideration," Schaefer said in a letter to Sen. Christopher Van Hollen Jr., a Montgomery County Democrat and a sponsor of the legislation, "I am now strongly in support of this initiative."
Van Hollen and other supporters of the bill were elated at the addition of what they regard as an important ally.
"The fact the comptroller and former governor is weighing in at this critical point in the debate will have a major impact," the senator said.
One of the chief opponents of the tax increase glumly agreed.
"I hope it has no impact," said J. William Pitcher, lobbyist for the Tobacco Institute, "but I think a lot of people think a lot of Mr. Schaefer, and this may influence them."
The bill has passed a House of Delegates committee and will be voted on in the full House soon. Its prospects are considered better than ever because 67 members signed a pledge in favor of the increase during last year's election. Seventy-one votes are needed for passage.
House Speaker Casper R. Taylor Jr. said yesterday he favors a national law increasing the tax so "island" states such as Maryland -- surrounded by other states with lower taxes -- would not exist.
"If we feel that pricing the product out of the reach of young people is the right thing to do, we should do it nationally," Taylor said.
The bill's fate is likely to be decided in the Senate, where Senate President Thomas V. Mike Miller is against it. Miller represents an area of Southern Maryland with numerous tobacco farmers.
Proponents of the increase have distributed studies from Canada and Oregon, most recently, showing that higher taxes reduce teen smoking by substantial amounts.
Taylor and Pitcher predicted Schaefer's determination to police heightened smuggling activity would be essential -- but perhaps futile. If the tax increase passes, Maryland's per-package tax on cigarettes will make the differential tax between it and Virginia $1.34, the highest in the nation between two adjoining states, Pitcher said.
Proponents of the tax increase point to state analysts who predict no more than 5 percent of retail sales would be lost to other states. Other studies, they say, show that smokers will experiment with cross-border economizing and then revert to their old shopping habits or quit smoking.
Smoke Free Maryland, which helped to persuade Schaefer to support its campaign, conceded that Canada reduced taxes to guard against smuggling. At same time, though, an earlier tax increase there reduced smoking among teen-agers by 60 percent and overall smoking by 40 percent.
Maryland has several protections against smuggling: Tobacco retailers must be licensed; cigarettes must carry a tax stamp; and dealers and manufacturers are required to keep careful records.
In his letter to Van Hollen, Schaefer said he and his staff are exploring ways to reduce opportunities for improper or counterfeit tax stamps to be used to avoid the tax: "The office of the Comptroller will employ state-of-the-art tactics and technologies in order to guarantee full compliance with tobacco tax law."
Policing is difficult but not impossible. R. J. Reynolds Tobacco International was convicted in December of smuggling to evade the tax. The company paid $15 million in fines.
Pub Date: 3/23/99