NOT EVERYTHING that happens in Concord is bad. This week, the Legislature is poised to start backing away from bad ideas on cigarettes and wine that would hurt businesses in the grocery industry.

In 2005, the governor and Legislature raised the tobacco tax. That was followed by an additional hike in 2007 that left cigarette taxes twice as high as their pre-2005 level.

Because New Hampshire's tax has always been lower than that in neighboring states, grocers on every border and in tourist areas have benefited from significant cross-border sales. Massachusetts residents drive north for cheaper cigarettes and also buy gas, wine, liquor and other collateral items. In all, it is estimated that more than 40 percent of New Hampshire sales go out of state.

Whenever Massachusetts raises its price, our sales go up. When we raise our price, sales go down. The stores suffer collateral damage from the loss not just of profitable cigarettes, but of beer, wine and other groceries as well.

The latest rounds of tax hikes have caused cigarette sales to drop dramatically. New Hampshire stores have seen sales decline from 191 million packs to around 155 million.

New Hampshire stores have had to absorb lost sales of more than $100 million on one of their more profitable items. You don't have to have much business sense to know that's not good for the bottom line.

With Massachusetts considering raising its cigarette tax by $1 per pack, businesses are poised to get back some of what they lost and restore a portion of those sales.

The governor had proposed raising New Hampshire's tax for a third time in his four years in office. (Give him credit for consistency.) But instead, Rep. Dan Eaton, D-Stoddard, a former store owner, put forth a particularly clever compromise that could well stave off the tax hike. His plan, about to pass the House, suspends the tax hike if sales in the first quarter of the fiscal year show the expected growth from the cross-border sales boom. I would have killed the increase outright, but this is a creative compromise.

The other revenue-raising plan came from the misunderstood "wine discount."

In New Hampshire, the state government buys all wines and spirits. Spirits are sold only at a small number of government-run liquor stores. Since 1978, wine has been sold not just at the government store, but also by grocers. This has increased sales and makes wine available at more than 10 times as many locations as spirits.

Grocers are part of only a small piece of the operation. The state pays a wholesale price for wine and then sets a retail shelf price for its stores at something like 65 percent higher, depending on the product. Grocers are not allowed to purchase wine wholesale. To promote additional sales, the state will sell to other retailers at 20 percent less than the retail shelf price, still significantly higher than the state's wholesale cost. Grocers also pay a little more if they don't pick it up at the state's warehouse in Nashua.

The grocer's retail price cannot be more than the price the state is charging down the street. The state's own retail markup may be 65 percent, but the grocer can't mark up to cover his costs by more than the 20 percent discount.

The governor wanted to reduce the grocers' wholesale discount to 10 percent. A partial compromise reduces the discount, but only for grocers with combined purchases of $350,000 or more. This isn't as generous as it seems.

If a store sold 90 percent of its stock, $350,000 wholesale might produce $390,000 of sales. The $40,000 would have to pay for rent, electricity, labor, insurance and delivery of the wine to the store. Anything left over would be profit. An entrepreneur who wanted to open a second location couldn't or his sales might be too high and he'd lose the discount.

The state pricing structure shouldn't discourage economic growth. Worse, by treating larger chains differently, we're attacking the profit centers. While the government-run stores saw wine growth of about 3 percent in 2007, chains experienced 7 percent sales growth. Attacking the growth area of your business is an unusual strategy.

The House did the right thing in semi-rejecting a tax hike. Representatives should address the wine problem, too. In a weak economy, it doesn't help to punish businesses just because you spent yourself into a hole.

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Charles M. Arlinghaus is president of the Josiah Bartlett Center for Public Policy, a free-market think tank in Concord.