How Much Revenue Would Maryland Cigarette Tax Really Raise?

Maryland Governor Martin O’Malley’s tax hike plan unveiled on Monday included a $1 increase in the state’s cigarette tax, which would make the tax $2.00 per pack. A paternalist may think this is a noble exercise for the government to stop people from smoking. A politician who merely wants more money to spend may like it because it increases the government’s coffers while only ticking off a minority of the population. However, neither person’s objective may be satisfied in the case of Maryland due to its close proximity to other states. How much revenue can the state really raise when most of the state lives within an hour’s driving distance of another state that has a significantly lower tax on cigarettes?

For example, Prince George’s and Montgomery Counties make up about one-third of Maryland’s population, and each of these counties borders Virginia. If O’Malley is successful at increasing Maryland’s cigarette tax, it would be $1.70 per pack higher than Virginia. Who is not going to drive 20 minutes to buy two cartons to save $34?

Maryland also has borders with Pennsylvania and West Virginia. O’Malley’s proposal would make Maryland’s tax 65 cents higher than Pennsylvania’s tax and $1.45 higher than West Virginia’s tax. Furthermore, Delaware’s tax is only 55 cents (like West Virginia), while Maryland’s tax would be $2.00 per pack.

Finally, Maryland’s proximity to the South in general will likely end up leading to even more trucks of bootlegged cigarettes coming from Virginia and the Carolinas to all parts of Maryland, including Baltimore which is the urban area furthest from another state.

For a complete listing of the cigarette, gasoline, alcohol, and general sales tax rates in each state, click here.