On November 19, Maryland Governor Parris Glendening proposed doubling the state's cigarette tax from 36 cents to 72 cents per pack. As a resident of Virginia, I am pleased by Governor Glendening's action because it will mean increased revenue for my state.

The reason is that the disparity between Maryland's new cigarette tax and that in Virginia will lead thousands of Marylanders to buy their cigarettes in Virginia, where the tax is just 2.5 cents per pack. Not only will Virginia see an increase in revenue from the cigarette tax, but from the sales tax and other taxes as well. This is because Marylanders who smoke undoubtedly will buy more clothing, groceries and other goods in Virginia while on cigarette-buying expeditions. The result is that some of Virginia's taxes will be shifted onto Maryland.

Of course, Marylanders may not be so happy about this development. But it is undeniable that higher cigarette taxes in Maryland will lead to increased cigarette sales in Virginia and surrounding states. If Governor Glendening's proposal is enacted, every single state bordering Maryland will have lower cigarette taxes.

In fact, Maryland's current 36-cent tax rate is already significantly depressing cigarette sales in the state. According to a recent Tax Foundation study, per capita cigarette sales in Maryland in 1995 were 19 percent below the national average. The study also shows that per capita cigarette sales in the District of Columbia were 38 percent below average. Since Maryland's new tax will exceed that in the District, it is reasonable to assume that per capita sales will probably fall to 40 percent below average in the future.

Governor Glendening has said that his primary motivation for raising the cigarette tax is to reduce smoking. Undoubtedly it will discourage some smoking, especially among teenagers. But for most smokers it is simply a tax increase, and a very regressive one, too, since the poor smoke in greater percentages than the rich. In any case, the easy availability of lower-taxed cigarettes just a short distance away from most Marylanders will severely limit the impact of the higher tax on smoking in Maryland.

Maryland will not be the first state to see its efforts to raise taxes and reduce smoking frustrated by cross-border sales. For example, Michigan's 1994 cigarette tax increase led to a sharp decline in cigarette sales along the border with Indiana, with corresponding increases in Indiana. The Tax Foundation reports that between 1980 and 1994 there was a 395 percent increase in cross-border cigarette sales nationwide. If Governor Glendening gets his way, this percentage certainly will rise.

Source: Bruce R. Bartlett, Senior Fellow, National Center for Policy Analysis, December 2, 1996.