Taxes

Sin taxes are not the solution to Maine’s public health problems

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Lawmakers on Maine’s Taxation Committee on Thursday, April 11 held public hearings on two bills that would increase so-called sin taxes in Maine to curb tobacco and alcohol use among our citizens. LD 1028 would significantly increase taxes imposed on tobacco products to provide additional funding for smoking cessation programs while LD 1070 aims to reduce the number of domestic assaults and suicides in Maine by increasing the excise and sales tax on alcohol.

It’s admirable to want to reduce tobacco addiction and the number of domestic assaults and suicides; not only are these complex societal issues but they are difficult problems to solve. However, we cannot simply tax away our problems. It’s unlikely the passage of these measures would significantly reduce alcohol and tobacco use in Maine, but Mainers would be poorer as a result.

LD 1070 increases the excise tax on malt liquor and hard cider from 35 cents per gallon (cpg) to 50 cpg; the excise tax on low-alcohol spirits products, fortified wines and sparkling wines from $1.24 per gallon to $1.50 per gallon; and the excise tax on wine from 60 cpg to $1 per gallon. In addition, it increases the premiums on all spirits in the state from $1.25 to $1.50 per proof gallon. Lastly, the bill increases the sales tax on the value of liquor from eight percent to 10 percent.

Mainers would be hit twice by these proposed tax increases. The excise tax to manufacture and sell alcohol, as well as the premium, would be passed onto consumers. In addition to the price increase, Mainers would be hit again with a two percent increase in the sales tax on alcohol. While these increases may appear to be just cents on the dollar, these costs add up on Mainers over the course of a year.  

If LD 1070 is passed, Maine would have the ninth highest tax on beer and the 21st highest on wine (currently ranked 18th and 32nd, respectively). Adopting this measure would give New Hampshire a larger competitive edge in alcohol. In 2017, Maine residents accounted for 7 percent of sales made at New Hampshire’s liquor outlets. Maine businesses would continue to lose more revenue to New Hampshire as a result of this bill, particularly in border communities.

Similarly, Maine already has the 15th highest tax on cigarettes in the country. If LD 1028 is passed, Maine would move up to fifth place at $3.50 per pack. Cigarette users in Maine would undoubtedly drive to New Hampshire to stock-up on cigarettes, as the Granite State’s tax is a mere $1.78 per pack in comparison (ranked 22nd).

The average cost for a pack of cigarettes in Maine is $7.37, or 73 cents more than the average price in New Hampshire. LD 1028 would create a difference of $2.23, creating greater incentive for cross-border consumption.

LD 1028 also increases the tax on the wholesale sales price of all other smokable tobacco products from 20 percent to 81 percent. This would make products such as cigars the most expensive in the country.

According to testimony submitted by the Maine Energy Marketers Association last session, cigarettes are retailers’ main driver of in-store sales and every dollar spent in convenience stores generates approximately 30 cents from in-store sales. If consumers are lured to New Hampshire or other states to buy tobacco and alcohol products in search of lower prices, or as a matter of convenience, Maine business owners will pay the price.

Sin taxes are also incredibly regressive, meaning they harm individuals living in poverty the most. Because this tax would be levied on individuals purchasing tobacco regardless of income, people living in poverty would spend a greater proportion of their income on these products than someone making $100,000 or more. In addition, adults that generate income below the federal poverty level are statistically more likely to smoke tobacco than high-income earners. Thus, any increased taxes to tobacco products would disproportionately burden low-income Mainers the most.

While these well-intentioned measures seek to curb behavior that weakens public health, increasing sin taxes on alcohol and tobacco products is not the right answer. If we want to give our neighbors a hand up and provide them with opportunity to improve their socioeconomic status, our state should be searching for ways to decrease – not increase – the tax burden incurred by the average Mainer.

About Adam Crepeau

Adam Crepeau serves as a policy analyst at The Maine Heritage Policy Center. He can be reached at acrepeau@mainepolicy.org.

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