TOBACCO TAXES HAVE BECOME UNRELIABLE

If the number of smokers continues to decline and cigarette sales continue to drop, Missouri will get less and less from its financial settlement with the tobacco industry.

But the state also can expect cigarette tax revenue to continue to decline.

While state officials had been saying Missouri should get about $6.7 billion over 25 years from the settlement, the Missouri Department of Revenue recently revised the estimate downward to $4.5 billion. The state's payoff from the settlement is based on industry profit, and the revised estimate from the settlement is significant.

At the same time, the state expects to see a continued decline in revenue from its 17-cents-per-pack tax on cigarettes, a tax that hasn't changed since 1993 when it went up 4 cents.

State tax revenue from cigarette sales has declined every budget year since 1996, when the tax generated $109.1 million. During fiscal year 2000, the tax brought in $103.4 million. During the first seven months of fiscal year 2001, it generated $58.2 million, which means it should amount to $99.8 million over the course of the fiscal year, a drop of approximately 3.6 percent from the previous year.

Using the projection for fiscal year 2001, revenue would have dropped by approximately 8.6 percent in five years.

Under state law, cigarette taxes are earmarked for three different funds, all of which support education and various health-care programs.

State lawmakers haven't yet decided how to spend proceeds from the tobacco settlement. Neither have they discussed what if anything should be done to prevent the loss of revenue from declining cigarette taxes.

It is apparent that, with tobacco sales declining, the loss of future tax revenue as well as the tobacco settlement revenue will need to be addressed by the legislature.

The revenue numbers reflect that anti-smoking efforts are working.

And as a result the state should no longer rely on tobacco taxes to fund such important programs as education and health care.