As I noted earlier this month, the General Assembly is considering a proposal to increase Maryland’s tobacco tax. Given the numerous tax hikes that Gov. O’Malley and our legislators have imposed on us in recent years, some observers are saying the General Assembly is “tax weary.” Maybe this fatigue will ensure that no tax hikes, including an increase in cigarette taxes, will emerge. Maybe not. But just in case there is a temptation to raise cigarette taxes, let’s review why it’s a bad idea.

In fact, there are many reasons increasing cigarette taxes is a bad idea. We’ve covered a lot of them at the Maryland Public Policy Institute in the past, so let’s review:

It won’t produce the revenue claimed. Imposing excise taxes like alcohol and tobacco generally produce less revenue than legislators claim. That’s what happened last time Maryland raised cigarette taxes. As I wrote about in the context of the alcohol tax increase, “When Maryland raised cigarette taxes by 100 percent in 2008, cigarette tax revenue only increased by 51 percent in the first year, according to an analysis by the Tax Foundation. This was far lower than was estimated when the tax was imposed.”

And why is that? Maybe it’s because of the next item on our list.

It will increase smuggling. Each state has its own tobacco tax rate, meaning that cigarettes sold in a low-tax state like North Carolina are far cheaper than cigarettes sold in other states. This difference in price could be as much as a few dollars a pack, giving a huge incentive for smugglers to take advantage of the tax laws to make a quick buck.

Just a few months ago the Mackinac Center released a report that since Maryland’s cigarette tax hike, smuggling has increased dramatically in the state. I blogged about it here. Marta Hummel Mossburg also runs down the evidence that higher tobacco tax rates fueling smuggling here.

It will hurt Maryland businesses. On a smaller scale than professional smugglers, ordinary cigarette smokers also take advantage of cigarette sales in low-tax states. Higher prices for cigarettes in Maryland give smokers an incentive to buy them in other states.

As I wrote in 2010, “Looking at neighboring states' cigarette sales, it seems that at least part of the drop-off in Maryland cigarette sales is due to Marylanders buying cigarettes in those states. Pennsylvania, for instance, had been seeing a steady decline in cigarette sales since 2002. In 2008, though, as Maryland cigarette sales were falling, Pennsylvania sales increased by more than 7 million packs. Cigarette sales in the District of Columbia and West Virginia also increased from 2007 to 2008.”

It’s no coincidence that a store on the Virginia/Maryland state line has the sign as you enter Maryland: “Last stop for cheap smokes.”

The link between raising Maryland’s cigarette tax and reducing underage tobacco use is weak. As I explained in my piece “Myths and Facts about Tobacco Taxes”: “Teen cigarette use has declined substantially since 2000, but it actually increased from 2006 to 2008, a time period covering the 2007 cigarette tax increase.” I also wrote an even more detailed analysis of these numbers here.

The case for raising cigarettes taxes is undercut by the evidence that hiking the tax will have a variety of unintended negative consequences and fail to live up to the promises of its backers. It’s sad to think that if the cigarette tax increase doesn’t pass this year, it won’t be because of any of these reasons. It will be because legislators are suffering from the “tax weariness” mentioned above. I’ll take good results regardless of why they happened, but it would be nice to think that the evidence would persuade at least a few legislators to give up on this type of tax hike folly.