Hartmann: Raise the Cigarette Tax Already

Mar 4, 2020 at 6:00 am
Missouri could make another $50 million and still have the country's lowest tobacco tax.
Missouri could make another $50 million and still have the country's lowest tobacco tax. COURTESY FRIED DOUGH/FLICKR

The following column regarding Missouri is presented to you in response to nothing.

No serious legislation is pending on my subject. I've received no press releases. No one's asked about it. As far as I can tell, no one's even talking about it.

The subject is tobacco taxation, and the lack thereof, in the state of Missouri. Our state's abject stupidity in this regard is not a definite sign of the apocalypse, but it does suggest we'd be raising our hands to perish first were it coming.

First, the bottom line. Missouri presently taxes tobacco sales with an excise tax of 17 cents per pack. That amounts to less than 10 percent of the national average taxation of $1.81 per pack on tobacco. That's not a misprint: On average, the 49 other states tax their citizens on cigarettes at more than ten times Missouri's rate.

Even more astonishing is this: Missouri could raise its cigarette tax by 70 percent and still rank dead last among the 50 states in tobacco taxation. A 12-cent-per-pack increase would put Missouri's rate at 29 cents per pack. Presently, Virginia, the nation's third-largest producer of tobacco, is ranked 49th among the states at 30 cents per pack.

We could quadruple our rate to 68 cents per pack — potentially generating something like $200 million in new state revenues annually — and we'd still be tied for 40th place with that bastion of progressive sagacity, Mississippi.

If anything, I might be understating this, because cigarette taxes are a moving target — as in moving upward — in those other 49 states. Recently, the Federation of Tax Administrators, with no dog in the fight, published a list of states' cigarette tax increases from 2000 to 2020. Missouri was the only state not on its list, having last raised its taxes in 1993, the late Gov. Mel Carnahan's first year in office.

That's right: Missouri is the only state in America not to have raised its cigarette taxes in this millennium. As if that weren't pitiful enough, no fewer than 38 of those other states have raised their taxes multiple times in the past two decades.

Understand that we're not talking phone change here. In 2018, the most recent year available, the state Department of Revenue reported cigarette tax collections of just under $76 million.

Using rough estimates, were Missouri to raise its cigarette tax by just 12 cents per pack, "moving" it from 50th place to 50th place among the states in taxation, state revenues would increase by more than $50 million annually. That's worth repeating: This state could add $50 million per year, every year, and still have the lowest tobacco taxes in America.

Some might counter that's not a fair economic analysis, because people would be forced for economic reasons to purchase fewer cigarettes if you raised their cost. And they would be right: Among the consequences of raising tobacco taxes is that it does tend to reduce tobacco use.

And why would that be a bad thing?

It would require someone above my pay grade to compute the net economic windfall of raising cigarette taxes. In theory, to calculate the net revenues from a 12 cent hike, you'd start with the additional $50 million in tax revenue, lower that number slightly by a factor related to lesser cigarette spending, then add back in something for the pesky detail that state health care costs decline when fewer people smoke. Go figure.

One argument that has actually been said out loud on behalf of Big Tobacco is that having the nation's lowest cigarettes has spurred a macabre thing known to some as tobacco tourism. That would be smokers for whom Missouri is a mecca of savings on their smokes, so much so that they stream across our borders to patronize our convenience stores. These entities — as a collective lobbying force — conveniently count among their prized possessions the souls of many politicians.

Far be it from me not to want our state to attract this coveted tourist population, assuming they cover their mouths while coughing, but it's worth noting that the main contiguous states bordering Missouri would still have trouble competing for Missouri's catchy "You Should Be Dying For Our Cigarette Prices" tobacco tourism theme.

Even at 29 cents per pack, neither Illinois ($2.98), Kansas ($1.29), Arkansas ($1.15) nor Iowa ($1.36) would be able to hold a cigarette lighter to us in the race to spread cancer and other diseases. Aren't we the smart ones?

Worse, Missouri's puny excise tax is exempted from sales tax. Most states add excise taxes first and then tax on the total purchase. Missouri is not most states.

It is arguable that a 12-cent-per-pack hike wouldn't affect behaviors much at all, meaning that it would only move the needle slightly toward the direction of sanity. But in the same vein, an increase such as that would be so diminutive that the state legislature and governor could enact it without approaching the dreaded Hancock Amendment limits governing tax hikes.

Don't hold your breath waiting for our low-information legislators to act on a tax increase — absolutely not in an election year, and probably never. Taxes are evil and health care spending — the best use of tobacco tax revenue — is for snowflakes, especially when containing the term "Medicaid."

Lawmakers of both parties can point to an endless parade of state ballot items to raise tobacco taxes that have been rejected by Missouri voters over the years. But these have never been a fair fight. Often, they've been doomed by lies and demagoguery from Big Tobacco and those who peddle its products.

But sometimes initiatives have sought to do too much too soon, or they've gotten derailed by ballot-wording issues. Missourians have never rejected a simple and modest increase in cigarette taxes because they have not had the opportunity to do so.

Obviously, it wouldn't be worth the time, cost and effort to seek voter approval for something as small as the 12 cent increase I alluded to — a correction that would leave the state in its prized (and insane) last-place rank in tobacco taxes. But the legislators and governor could do that tomorrow if they were really serious about the budget crunch they're always whining about.

There's no better example of political malfeasance than this one. Taxing cigarette sales is a matter of public health and common sense, and rarely controversial outside of top tobacco-producing states. For Missouri to languish so far behind the nation is nothing short of embarrassing.

Were it up to me, the voters would be presented with some simple and clean measure for a gradual series of modest increases in tobacco taxes over a five- or ten-year period, linked to health care services, with a goal of rising to the rank of mediocre. But it's not up to me.

Nor, apparently, anyone else in Missouri.

Ray Hartmann founded the Riverfront Times in 1977. Contact him at [email protected] or catch him on St. Louis In the Know With Ray Hartmann from 9 to 11 p.m. Monday thru Friday on KTRS (550 AM).