On Nov. 6, Springfieldians will join voters from around the state to determine whether a tax that is projected to generate $283 million in new revenue per year for education should be enacted. Proposition B would raise the state’s tax on major brands of cigarettes to 90 cents per pack, or 429 percent, from 17 cents per pack – the lowest rate in the nation, according to the National Conference of State Legislatures.
Proponents of the voter initiative, such as the Springfield Area Chamber of Commerce, say area schools need the money the tax could generate, and that Missouri’s tax rate is too low compared to other states. Opponents such as the Missouri Petroleum Marketers & Convenience Store Association say taxing districts, consumers and businesses would be hurt by the measure.
Sandy Howard, vice president of public affairs for the Springfield chamber, said improving funding for Missouri’s public educational system is key to improving workforce quality statewide.
“One factor is that Missouri is ranked last among the 50 states with our self-tax on tobacco products. More importantly, the big factor in the decision for our board was the impact it would have on education,” Howard said. “Improved public education, at all levels, will contribute to the strength of Missouri’s workforce and enhance Missouri’s ability to compete with other states.”
Missouri is one of seven states to impose a tax less than 50 cents per pack, according to the NCSL, a bipartisan organization serving state lawmakers. Missouri’s eight neighboring states average $1.02 per pack.
Leading the charge against Prop B is the Missouri Petroleum Marketers & Convenience Store Association. MPCA Executive Director Ron Leone said with the help of roughly $2 million in donations from members and regional tobacco companies, the organization is fighting what it sees as a tax that will harm Missouri businesses.
“You can be pro-education and still think Prop B is too big and too dangerous and vote ‘no,’” Leone said. “It is a 760 percent tax increase that brings us from the lowest tax in the region to having a competitive disadvantage against four of our eight bordering states. That means if Proposition B passes, Nebraska, Kentucky, Tennessee and Kansas would all have lower tobacco taxes than we do.”
He said generic cigarettes would be taxed at a higher rate under the proposal – $1.47 per pack, a 764 percent increase.
Julie Sally, a spokeswoman for Show-Me a Brighter Future, the organization that drafted Prop B, said the move to tax generic tobacco products at a higher rate closes a loophole prohibiting generic producers from contributing to the national tobacco settlement revenues that flow into the state annually. According to Show-Me a Brighter Future, the proposal would dedicate half of the tax dollars toward elementary and secondary education; 30 percent to colleges and universities; and 20 percent to tobacco prevention programs.
The group, which receives funding support from organizations such as the American Cancer Society and the American Heart Association, cites big savings in public health costs as a reason for the measure. Tobacco use causes approximately $2.13 billion in annual health care expenditures in Missouri, according to the organization. The group estimates the tax increase would decrease youth smoking by at least 12 percent in Missouri, keep 45,700 kids from becoming adult smokers and help 28,200 current adult smokers quit. ShowMeABrighterFuture.com states that 22,000 Missouri residents would be saved from premature smoking-caused deaths.
Leone argues with fewer sales in tobacco, state and local coffers would lose an estimated $67.7 million per year, based on an analysis by a University of Missouri economics professor who projected losses given the proponents’ estimate that 157 million fewer packs of cigarettes would be sold.
“So for proponents to come around and say, ‘Somebody else will pay for this tax increase,’ I have some startling news for you: That is simply not true, because we all have at least $67 million of skin in the game,” Leone said.
In fiscal 2012, less than 1 percent of tobacco settlement funds in Missouri went toward tobacco prevention programs, according to
TobaccoFreeKids.org.
Drury University economics professor Steven Mullins said retailers bordering state lines would feel the most pain by Prop B.
“The big problem is that because our tax rate is so low compared to neighboring states for so long, that convenience stores on the periphery of the border have been getting an indirect subsidy by people coming across the state line to buy cigarettes,” Mullins said. “There is no doubt that they will see some sales lost.”
Springfield-based Rapid Robert’s operates two convenience stores that could be threatened, said Marketing Director Todd Wilson.
“It will have an impact on us,” Wilson said, referring to a store in Joplin and one south of Branson. “There are small businesses like ours scattered along the state lines that will lose a substantial amount of business.”
Wilson said one of the Rapid Robert’s stores in jeopardy could close if the tax measure is passed.
Mullins said tobacco products create greater external costs other than goods. “But it is hard to explain that to a convenience store that gets 15 percent to 20 percent of its sales from tobacco,” Mullins said.
Stephen Hall, communications director for the American Heart Association in Springfield, said the health benefits that would result from the estimated decline in smoking among residents would far outweigh any economic losses by businesses.
“We have a tobacco tax that is generating $95 million a year in revenue, but the state is having to pay $535 million in Medicaid expenses related to tobacco use alone. That is a huge gap,” Hall said.
