State cigarette tax would be among highest with Prop A

JEFFERSON CITY, Mo. -- At 17 cents per pack, Missouri's state excise tax on cigarettes is lower than those in all but seven states. If voters approve a 55-cent increase, Missouri will have the 18th highest cigarette tax in the nation.

Among neighboring states, only Kentucky's 3-cent tax is lower than Missouri's. With passage of the proposed increase, which goes on the Nov. 5 ballot as Proposition A, Missouri's new 72-cent levy would, at least temporarily, be second only to Illinois' 98-cent tax, which recently increased by 40 cents.

In Kansas, the cigarette tax increased from 46 cents to 70 cents per pack as of July 1. Lawmakers approved an additional 9-cent hike that takes effect July 1, 2003.

James Cox, a tax analyst with the nonpartisan National Conference of State Legislatures in Washington, D.C., said states are increasingly turning to cigarette taxes to help prop up flagging state budgets. In 2001, cigarette tax hikes were proposed in 18 states but only passed in five. This year, 33 states considered such increases with approval being won in 19.

"It is a trend I would venture to say will continue into next year as well," Cox said.

Of the cigarette tax increases passed this year, all were adopted by legislative action except in Oregon, where voters last week approved a 60-cent increase.

Easy target

Cox said cigarette taxes make an easy target for states looking to boost revenue.

"An increase in tobacco taxes affects only a small portion of the population," Cox said. "Cigarette taxes are viewed as a user fee, so they are easily passed and generate a lot of revenue, which is the ultimate goal."

The states that imposed higher cigarette taxes this year are anticipating nearly $2.8 billion a year in combined new revenue.

Proposition A would mean an additional $342 million a year for Missouri. All of the money would be earmarked for Medicare reimbursements to hospitals and doctors, a prescription drug assistance program for the elderly, life sciences research, early childhood education and smoking prevention and cessation efforts.

However, Cox said that rather than improving overall funding in such areas, revenue generated by new tobacco taxes in other states has instead supplanted general revenue as a funding source, freeing up that money for other purposes.

Missouri collected $97.3 million during the fiscal year ending July 1 from the current 17-cent tax. That revenue stream has declined every year since 1996.

Cigarette taxes vary widely across the nation. Massachusetts boasts the highest at $1.51 per pack; Virginia the lowest at 2.5 cents per pack. Thirteen states have levies of $1 a pack or higher.

According to the R.J. Reynolds Tobacco Co., the average cost of a pack of cigarettes in the U.S. was $3.28 as of April, which was before this year's tax hikes in various states took effect. Of that price, taxes accounted for 47 percent of the cost, or $1.54. The company claims manufacturers' make a profit of just 10 cents a pack, or 3 percent.

mpowers@semissourian.com

(573) 635-4608

LIGHTING UP GOING UP

Excise taxes per 20-cigarette pack in Missouri and neighboring states. Ranking is among all 50 states plus the District of Columbia:

State Tax Rank

Illinois 98 cents 14

Kansas* 70 18

Nebraska** 64 21

Iowa 36 29

Arkansas 31.5 34

Oklahoma 23 37

Tennessee 20 39

Missouri 17 43

Kentucky 3 50

* Kansas tax will increase to 79 cents on July 1, 2003.

** Nebraska figure includes a 30-cent increase effective Oct. 1.

SOURCE: Federation of Tax Administrators