Snuff bedfellows

Proposal to change taxes on smokeless tobacco finds cancer society, R.J. Reynolds on same side

General Assembly 2009

March 25, 2009|By Gadi Dechter | Gadi Dechter,gadi.dechter@baltsun.com

Leaders in both houses of the General Assembly are backing a tax change on a product known as moist snuff that is being pushed by tobacco giant Philip Morris - and opposed by an unusual coalition of other tobacco interests and health advocates.

Lobbyist Bruce Bereano, representing the Maryland Association of Tobacco & Candy Distributors, grinned Tuesday at finding himself on the same side as the American Cancer Society.

"In the 36 years I've been lobbying for the tobacco industry, this is a first," Bereano said. "It's music to my ears."

So why is an arcane tax change luring cigarette distributors and R.J. Reynolds into an alliance with the cancer society and the Maryland Lung Association?

Because it's a classic "redheaded Eskimo," said Eric Gally, a lobbyist for public health advocates, using a term for legislation carefully written to benefit a small constituency.

Sponsored by Sen. Ulysses Currie and Del. Sheila Hixson, who head the tax committees in their respective chambers, the bill could give a competitive advantage to Philip Morris affiliate U.S. Smokeless Tobacco Co., manufacturer of brands Skoal and Copenhagen. The bill is also backed by Del. Kumar P. Barve, a Montgomery County Democrat and majority leader in the House, and Del. Justin D. Ross, the chief deputy majority whip from Prince George's County.

The measure would change the way the tins of moist snuff are taxed, from a 15 percent levy on the package's wholesale price to a 75 cent tax per ounce of tobacco. The state health department says that adjustment would benefit producers of higher-priced or "premium" snuff such as Skoal, while increasing the tax on "value" brands such as Grizzly, manufactured by Conwood Co., a subsidiary of Reynolds American Inc.

"Philip Morris has a 75 percent monopolistic market share with moist snuff," Ed Roberson, a former Conwood president, told the House Economic Matters Committee at Tuesday's hearing. "And they want you, the legislature, to protect that market share."

Nonsense, said the bill's proponents, who argued that the law would create an "even playing field" for producers of higher-quality products and would bring the taxing structure for moist snuff in line with excise taxes on cigarettes and other products.

The law would also increase tax revenues, at least in the near term, according to a legislative analysis. Sponsoring lawmakers say that's what attracted them to the bill.

Robert Shepherd, a former New York deputy tax commissioner and consultant for Philip Morris' smokeless-products subsidiary, told lawmakers that the bill fixes a "broken system" that effectively gives a "tax subsidy" to cheap products. Gally predicted a "very close" battle on the bill, which has failed in recent years. He said the fight was mostly between Philip Morris and R.J. Reynolds, who are "going at it almost like I've never seen anybody go at it."

But for some advocates, siding with a tobacco company is awkward. "We're not on the same side," said Bonita M. Pennino, a lobbyist for the American Cancer Society, in an interview. "We're advocating to improve public health. They're advocating to improve their bottom line."

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