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Sparrow Capital

Missourians to consider cigarette tax increase


Voters to weigh Prop B Nov. 6


Taylor Beck
State Capitol Bureau
October 10, 2012 - JEFFERSON CITY — Missourians will vote this November on whether to approve a cigarette tax increase.

The initiative, Proposition B, would put on an additional 73 cents per pack on cigarettes, increasing the total tax to 90 cents per pack. Missouri currently has the lowest tobacco tax in the nation at 17 cents a pack.

The tax on loose tobacco used in roll-your-own stores would be 25 percent and 15 percent for other tobacco products.

If approved, Prop B would bring in an estimated $283 million to $423 million a year according to an estimate from the state auditor. The proceeds would be divided between K-12 education, higher education and tobacco prevention and education programs.

Ron Leone, executive director of the Missouri Petroleum Marketers and Convenience Store Association, said Prop B's 760 percent increase is devastating.

"It will hurt Missouri consumers, it will force small businesses to close, it will cause people to lose their jobs, and it will generate less tax revenue for local and state coffers that are already stretched thin because of the great recession," Leone said.

If the tax was a more reasonable amount allowing retailers to maintain their competitive tax advantage over higher-taxed border states, Leone said he would support the proposition.

In 2002 and 2006. voters had the choice to raise the cigarette tax but both ballot measures failed.

Twenty percent of the proceeds from the tax would go in a tobacco abstinence programs, 50 percent for K-12 education and 30 percent to higher education.

Under the petition, the Department of Elementary and Secondary Education:

• Would be responsible for distributing the funds to Missouri school districts.

• Would give funds to school districts based on average daily attendance in the event that the school funding formula is not fully funded. Currently, the school funding formula is estimated to be $460 million underfunded.

• Should the Foundation Formula be funded fully, the money would be distributed to schools based on enrollment. This is different than how money is typically spread to school districts. The state uses the Foundation Formula to see how much each district receives based mostly on attendance and local taxes.

• At least 25 percent of the money in each school district must be used toward direct classroom expenditures.

Under the petition, the Department of Higher Education:

• Would be responsible for distributing funds to public colleges and universities.

• Each higher education institution receiving this funding must deposit it into a new or existing restricted fund.

These funds can only be used on education of future caregivers, faculty matters, facility improvements, classroom instructional technology and campus safety.

• At least 25 percent of the money distributed must be used toward programs and initiatives related to the education, training, and development of future caregivers. This includes physicians, dentists, nurses and other health care providers.

Otto Fajen, legislative director of the Missouri National Education Association, says his organization supports Prop B.

"It's going to move the ball forward, so from the perspective of improving educational opportunities across the state, it is progress," Fajen said.

Fajen said it's not a massive increase when you think about how many students are in the state, but any help counts. He does not know why the initiative's specifications for spreading the funding to schools is different than the foundation formula.

Earlier this year, Gov. Jay Nixon declined to take a side on the issue.

"I don't expect to be active in anyway with that campaign and we'll await the verdict of Missourians this fall," Nixon said in September.

Along with having the lowest tobacco tax in the country, Missourians have the 48th highest percentage of adult smokers according to a 2010 study by the Center for Disease Control. In Missouri, 25 percent of adults are smokers and 11.8 percent of people ages 12 to 17 are smokers.

Supporters of Prop B, like Rep. Chris Kelly, D-Columbia, say increasing the tax will discourage smoking in Missouri and provide important education funds.

"For potential teenage smokers, there's a strong correlation between price and starting to smoke. And so, we know the tax will produce revenue that we need, and we also hope that it will discourage teenage smokers," Kelly said.

Opponents say raising the tax will cause a loss in revenue. They worry people will travel from Missouri to bordering states with lower tobacco taxes to buy their cigarettes. If Prop B passes, half of Missouri's eight border states will have higher tobacco taxes. These states are Illinois, Iowa, Oklahoma and Arkansas.

"That argument has no intellectual basis because the states that have lower (taxes) that are near us are only a tiny, tiny bit lower," Kelly said.

Sen. Jim Lembke, R-Lemay, also opposed the proposition. He said there needs to be reform for issues such as tax credits before we tackle a tobacco tax.

"We are making decisions in this state and those decisions are going the way of corporate welfare rather than the promises that we keep to fund our public schools," Lembke said.


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