LANDOVER -- Gov. Martin O'Malley said yesterday that he wants to double the state's cigarette tax to $2 a pack, with the goals of tackling the state's looming budget deficit and providing a "down payment" on a broader expansion of health care coverage.
"Our hope is to use the proceeds first for debt relief, but then to bridge us to a more rational, compassionate and common sense system that allows us to give people the coverage up-front so they're not suffering more and costing us more," O'Malley told elderly residents at an assisted living center, where he also outlined tax breaks for seniors and low-income families.
The proposed tobacco tax increase appears to be aimed at reaching a compromise among competing interests in the General Assembly, where a cigarette tax increase was approved in the spring by the House of Delegates but rejected by the state Senate.
Senate leaders have said the state must address a $1.7 billion structural deficit before enacting social programs. In the House, the cigarette tax was a key funding mechanism of a proposal to extend medical coverage to nearly 250,000 uninsured residents.
Aides said that if the measure is approved in a special session of the General Assembly in coming months, the cigarette tax increase would bring in an estimated $85 million in the first six months of next year, which would go toward health care coverage.
O'Malley spokesman Rick Abbruzzese, however, said $170 million generated for the fiscal year that begins July 1 would go toward addressing the state's structural deficit as the governor.
Although the state covers children in households earning up to 300 percent of the federal poverty level - $51,500 for a family of three - Maryland makes it difficult for an adult to qualify for Medicaid, the federal-state health insurance program for the poor. A working parent in a family of three has to earn less than $6,288 a year, about half the pay of a full-time worker earning the minimum wage.
In coming weeks, O'Malley said, he will release details of a plan to provide incentives for small businesses to cover the cost of employee health insurance and to reduce the number of uninsured people by adjusting Medicaid limits.
Advocates of the tobacco tax for health care applauded the proposal but are waiting for details on how far-reaching the total package would be.
"There's obviously some disagreement over how aggressive we should be with health care reform," said Del. Peter A. Hammen, a Baltimore Democrat who chairs the Health and Government Operations Committee. "But I think we are at the point right now where we're working together with a plan, and we hope to have something that will increase access to affordable, quality health care and reduce the burden on the system."
Vincent DeMarco, president of the Maryland Citizens' Health Initiative, said there is statewide support for an increased cigarette tax.
"We're here to say what the governor's proposing is tremendous, and the details of how it's going to be done, we're going to work out," he said.
Sen. Ulysses E. Currie, chairman of the Budget and Taxation Committee, who has previously expressed a preference for using cigarette tax revenue to reduce the deficit, said he supports the plan.
"I think there will be debate on where [the revenue] goes, but Medicaid is a growing need," said Currie, a Democrat.
Doubling the cigarette tax would give Maryland the seventh-highest tax nationally, up from 20th, according to the Federation of Tax Administrators. Delaware recently increased its rate from 55 cents a pack to $1.15. The rate is 30 cents a pack in Virginia, 55 cents a pack in West Virginia and $1.35 in Pennsylvania. New Jersey has the highest tax, $2.575.
Republicans have vowed to fight tax increases, and Sen. David R. Brinkley, the minority leader from Frederick County, characterized the goals of the cigarette tax increase as "diametrically opposed."
"On one hand, they want to stop people from smoking, and on the other, they want to take care of" funding for health care, Brinkley said. "If they have success in one, they've failed in the other."
O'Malley expects fewer people to smoke when cigarettes cost more. That, in turn, would reduce revenues from the tax. He said money from proposals to increase the sales and income taxes, along with slots and other initiatives, would "ramp up" in later years.
In addition to the health care initiatives, O'Malley pitched a sales tax rebate and a doubling of the senior tax exemption. He acknowledged that some of his initiatives designed to ease the burden of proposed increases in the sales and other taxes will not reach all Marylanders.
O'Malley said yesterday that he favors increasing a senior income tax exemption from $1,000 to $2,000 and providing a $50 sales tax rebate for households with gross income up to $30,000 a year. The proposals would cost the state $10 million and $20 million, respectively, he said.
Calling his proposals a "multifaceted approach to solving a very complex problem," AARP in Maryland said in a statement that O'Malley was "recognizing the need to protect older Marylanders on fixed incomes from shouldering an unfair burden with his proposal today for tax exemptions and rebates."