Federal lawmakers are often hesitant to wade into state matters, but Missouri Senator Claire McCaskill voiced her support for Proposition B, which would increase the state excise tax on tobacco products sold in Missouri, taking the rate from 17 to 90 cents per pack, a whopping 429 percent increase.
It’s bad enough that McCaskill is calling for a tax increase on the majority of small business profits, but now cheerleading for a tax hike that will most negatively affect those who can afford it the least. Studies have shown that 41 percent of smokers in Missouri earn less than $15,000 a year. At a time when President Obama has raised the federal excise tax on cigarettes by 156 percent.
Furthermore, McCaskill has stated that, “We’ll be the cheapest cigarettes in the whole Midwest with the additional tax.” This is completely false as bordering states Kentucky and Tennessee will both have lower tobacco taxes at $0.60 and $0.62 respectively. As we have seen with tobacco tax hikes in other locales, they have the effect of pushing many residents to make their cigarette purchases in neighboring states. According to a study by the University of Illinois at Chicago, 75 percent of sampled cigarette packs found on the streets of the windy city, were purchased outside of the city whose state and local tobacco taxes totaled $4.05 at the time of the study. The out of state purchases cost the city roughly $120 million in revenue a year.
McCaskill and other proponents of the initiative contend that with the $0.73 increase the state is projected to bring in an additional $283 to $423 million in revenue, which will to go toward smoking cession programs, K-12 education and higher education programs. What lawmakers fail to understand is that history has shown that cigarettes are an uncertain source of revenue. For example, New Jersey raised their state excise tax on cigarettes in 2006 by 17.5 cents per pack. In FY 2007 the state collected $52 million less revenue than projected. Maryland also raised their cigarette taxes in 2007 and 2008 by 100 percent hoping to increase state revenue. They only collected half of what they expected from the tax increase.
Americans for Tax Reform urges Missouri taxpayers to vote no on Proposition B. For a list of ATR’s recommendations for ballot measures in others states, click here.