Maryland Quadruples Seizure of Contraband Cigs

Since the state of Maryland instituted a tax increase of $2 per pack in January, agents with the Maryland Comptroller’s Office have seized more than 46,000 packs of contraband cigarettes, smokes that were brought illegally across state lines, according to a report by the Baltimore Sun.

That’s a nearly four-fold increase from about 13,000 packs seized over the same period in 2007, the newspaper reported.

In August, in the largest bust so far this year, agents confiscated nearly 8,000 cigarette packs after stopping a man driving a Chevrolet Astro van on Interstate 495.
State officials said they would be hard-pressed to blame the sharp rise in smuggled smokes solely on higher taxes, but they suspect that the levy is a factor. Maryland has one of the highest tobacco taxes in the nation, while neighboring states have some of the lowest.

Virginia’s levy, for instance, is 30 cents a pack. That means a carton in the there is $17 cheaper than one in Maryland, creating an opportunity for smugglers to make a quick buck by selling out-of-state cigarettes.

“It’s just become even more profitable for smugglers now," said Jeffrey A. Kelly, director of the comptroller’s field enforcement division, adding that his agents on surveillance duty also have spotted more Maryland residents in Virginia buying cigarettes.

The fallout from raising the tobacco tax was the subject of much debate in the Maryland General Assembly. During a special legislative session last year, Gov. Martin O’Malley proposed raising a number of taxes, including the tobacco tax, as part of a broader package to plug a $1.7 billion budget shortfall, The Baltimore Sun reported.

Advocates of the tobacco tax boost said it would improve public health and discourage smoking particularly among teens, the newspaper reported.

Opponents argued the higher cigarette tax would hurt mom-and-pop businesses near borders with other states and would help to foster a black market and encourage cross-border smuggling.

"The Democrats in their zeal to raise taxes on cigarettes have driven Lord knows how much commerce across the boarder," said Del. Anthony J. O’Donnell, the House minority leader from Southern Maryland. "The tax increases are going to hurt us in ways we haven’t even contemplated yet. We’re just starting to see ways we knew they would have an impact.”

The higher tax appears to have cut into sales more than expected, the newspaper reported. Pack sales have dropped 23% to 35% each month since the tax was enacted, much greater than the 18% drop in sales predicted by fiscal analysts when the higher tobacco tax was proposed.

Comptroller Peter Franchot said in a recent letter to legislative leaders that tobacco tax collections this year have been substantially lower than expected. He noted that the strained economy has prompted some consumers to cut back.

At the Citgo gas station in the Western Maryland city of Brunswick, manager Cindy Furr said her cigarette sales have dropped "dramatically" because customers can cross the Potomac River and buy smokes more cheaply at a convenience store a mile away in Virginia.

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