Commentary

Raising tobacco taxes will hurt residents, businesses struggling to recover post-pandemic

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The nonpartisan Revenue Forecasting Committee met recently and determined Maine is in a strong financial position, with the General Fund expected to be bolstered by almost $462 million for the current fiscal year. This is in addition to the anticipated $6 billion windfall from the federal stimulus package. Great news, to be sure, but it begs the question why the Maine legislature would continue to consider doubling the tax rate on every type of tobacco product, including a pack of cigarettes, from $2 to $4.

With the good budget news, Governor Mills took a victory lap saying: “The State revenues have not only returned to pre-pandemic levels but have surpassed those estimates and are a testament to the power of the Federal stimulus, our prudent fiscal management of the State budget and the resiliency of Maine business and workers.”

Kirsten Figueroa, Commissioner for the Department of Administrative & Financial Services added, “Our commitment to the fiscal stability of Maine and the lives and livelihoods of Maine people continues, and will be a cornerstone of a forthcoming supplemental budget proposal.”

With news like this, it’s easy to forget we’re still emerging from a pandemic. Despite strong revenue projections, many real people continue to struggle – particularly low-income folks. According to the Pew Research Center, 39% of upper income adults, compared to just 22% of lower-income adults, say their financial situation has improved during the pandemic. When it comes to saving money, 47% of lower-income adults, who generally save very little, are saving even less now.

Now is not the time to be raising any tax, but especially not those taxes which disproportionately impact the lowest income earners, like tobacco. According to the CDC, over 60% of Maine smokers earn less than $25,000 annually, with 38.1% earning under $15,000. For a pack a day smoker, this tax increase would mean a $777 additional hit annually. Regardless of where one stands on tobacco, the fact remains that tobacco taxes are among the most regressive because they most severely impact those least able to afford it.

For your local convenience store also struggling to emerge from the pandemic, the impact of this tobacco tax would be equally painful, particularly those within driving distance to New Hampshire. Because of its relatively low tobacco tax rate and non-existent sales tax, tobacco would be far less expensive in New Hampshire, so this tax increase threatens to rob Maine stores and the Maine General Fund of important revenue.

According to the National Association of Convenience Stores (NACS), tobacco represents 38.8% of all in-store sales and tobacco purchasers are often among stores’ most loyal customers. If Maine convenience stores were to lose these customers, they would also lose all of their non-tobacco purchases – the entire market basket made up of drinks, food, lottery tickets and more.

We’ve heard the saying “we’re all in this together” for more than a year now. It’s time to recognize that the saying goes beyond mask-wearing and social distancing and refers to empathy for our neighbors, and support for our local businesses. The state may not need the money now, but our local businesses and lowest income residents certainly do.

About Jonathan Shaer

Jonathan Shaer is executive director of the New England Convenience Store and Energy Marketers Association.

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