Cigarettes and Tobacco News

Jan 19, 2007 -- For the priciest smokes in the country, look no farther than Chicago. A combination of state, county and local taxes adds $3.66 to the cost of a pack, and for downtown convenience shop owner Eddie Ortiz, that's deadly for business. Newport, his most popular brand, now sells for $7.25 a pack.

"When I went to the warehouse before, I had to buy cigarettes every day," Ortiz said. "Now I buy every other day."

As Maine lawmakers consider Gov. John Baldacci's proposal to raise the state cigarette tax to $3 starting in July, the experiences of a handful of cities that have broken the $3 barrier help frame the debate.

There have been reports of black market activity and lost sales for local vendors as smokers seek better deals in places with lower taxes. And then there is the difficult-to-regulate realm of Internet sales.

But supporters of cigarette tax increases say the potential effect on Maine's 200,000-plus smokers outweighs any drawbacks.

"It's a win for public health and prevents kids from starting to smoke and helps adult members quit," said Danny McGoldrick, vice president of research at the national Center for Tobacco-Free Kids. "It's a big win for state budgets."

Gunnar Bailey-Worth, 21, contends it is unfair for the government to tax smokers, noting that even tanning beds can be dangerous. But he is not prepared to pay more for cigarettes -- most would cost more than $6 a pack -- or concoct ways to avoid the tax.

"I don't want to say I'd be more willing to quit" if the increase is approved, said Bailey-Worth, a line cook in Portland. "But seeing as I'm in the lower middle class, I'll probably have to."

If the tax increase passes, it will give Maine the largest state levy on cigarettes in the country. More than $130 million in new revenue would go into the general fund over the next two years and cause sales to drop by 7.5 percent in the first year, according to projections by Maine Revenue Services.

The decline would slow to 1 percent to 2 percent in the following years, said Mike Allen, the agency's director of economic research.

The relationship between price and demand dictates that returns on the tax increase would diminish eventually. But Ed Miller, chief executive officer of the American Lung Association in Maine, said demand for tobacco will take a long time to wane.

"You have a group of very heavily addicted smokers," Miller said.

In fact, the success rate for people who try to quit on their own is just 5 percent to 10 percent, according to Portland-based Center for Tobacco Independence, which runs the Maine Tobacco Helpline.

Despite the odds, Maine has gained national acclaim for reducing its youth smoking rate from one of the worst in the country to 16.2 percent, one of the best. The adult smoking rate also has dropped steadily and mirrors the national average of 20.9 percent.

Health advocates in Maine credit the changes to the growing popularity of the help line. Administrators said it can increase the success rate by up to 25 percent through counseling over the phone and free nicotine-replacement medication for people who need it.

Bans on smoking in bars and restaurants have dampened sales of tobacco. But nothing has had a more visible effect than a rise in the cigarette tax.

In 2005, the year the tax was doubled to $2, the number of smokers using the help line jumped to more than 13,000 -- almost double from the year before, said Dr. Susan Swartz, director of the Center for Tobacco Independence.

"Calls were still going up even before the tax went into effect. The tax blew everything out of the water," Swartz said.

After the tax increase, cigarette sales fell from 91.4 million packs in 2005 to 80.4 million in 2006, according to Maine Revenue Services.

That number, however, does not reflect cigarette sales made over the Internet, on the street or through cross-border sales.

Tim Sheppard, 32, buys cigarettes during monthly visits with friends and family in New Hampshire, where the tax is 80 cents per pack.

"It's ridiculously cheap down there," Sheppard said while taking a cigarette break from a carpentry job in Portland. "It's under $30 a carton, where in Maine it's $40 to $50."

Critics of the proposed tax increase acknowledged that it will lower consumption to some extent. But they argue that slowed sales also represents profits that Maine vendors won't be seeing.

John Archard, the state's tobacco enforcement coordinator, said Internet sales shouldn't hurt state revenues because licensed tobacco sellers are required to report sales to Maine Revenue Services, which then bills online buyers.

Not all sellers are licensed with the state, but the revenue service is trying to identify scofflaws and has filed complaints against them, Archard said.

There is still "a ways to go," he said, but "people are starting to learn that they're going to have to pay for the tax no matter where they buy."