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Peter Brennan is the executive director of the New England Convenience Store & Energy Marketers Association.
Maine retailers know what it’s like to have to fill budget holes. Many of the retailers I work with run slim profit margin businesses, but like everyone else they’ve had to deal with higher prices on everyday goods, and a tight labor market that makes it even more expensive to stay open and keep the lights on.
The Maine Legislature is considering making what I see as a risky bet on future budget revenues that might, if they’re very lucky, actually flow from a contemplated tax hike, but then again, they might not. This is a gamble in which Maine businesses are the proverbial chips on the table, and the stakes for them are very high.
Over the next few days, our elected representatives in Augusta will have to decide whether or not to push through a highly regressive 75 percent tax hike on tobacco and nicotine products.
This is a big number, and one that should worry them as much as it worries us. Not only could this hike potentially shutter a number of stores and gas stations on which Mainers and tourists from out of state rely; it could fail to deliver the revenue the Legislature and the governor want and need in order to fund priorities like rural health and rural health education for future doctors.
That’s because I believe the number one, guaranteed effect of this tax hike will be to drive smokers and nicotine pirates across the border to New Hampshire to buy up even more product than they already do, for ultimate consumption in Maine. Maine is already a destination state for smuggled tobacco and nicotine products. New Hampshire taxes its tobacco and nicotine products less than we currently do, even without this tax hike. About 40 percent of our population lives within easy driving distance of the state line.
This, plus underlying Maine smoking rates, are reasons I see to dispense with one of the non-revenue arguments for the tax increase — that it may not raise anything like the desired revenue, but it could prompt more Mainers to stop smoking. While some states that have hiked cigarette taxes have seen a decline in smoking rates, Mainers currently smoke more than our New Hampshire neighbors, who sell us plenty of cigarettes. I think smoking likely won’t decline here with the tax, though sales by Maine retailers likely will, and state revenue projections will almost certainly be missed.
This is also true because a big way that smokers have been ditching actual tobacco recently is by switching to nicotine pouches. Under former President Joe Biden, the Food and Drug Administration concluded that these were less harmful to health, and lots of smokers looking to reduce the harm they sustain seem to like them.
But this tax hike proposal would increase taxes on these pouches by 75 percent also, just the same as cigarettes. Again, buying these products in New Hampshire or from those who smuggle them across from there will become much more attractive. That doesn’t help Maine retailers, Maine taxpayers, Maine legislators, or the Maine budget.
Why would we give New Hampshire such an obvious boost and inflict such obvious self harm? Especially when the tax itself is regressive and will hammer poor Mainers who don’t seek to dodge it?
Legislators should reject the tax increase proposal and look at more reliable ways of funding priority spending. We’re counting on them to do so, and there is still a little time left.
