New cigarette taxes could be on ballot in hesitant states
JEFFERSON CITY, MO. >> An entire generation has come of age since the last time Missouri raised its cigarette tax, from 13 cents a pack to 17 cents, in 1993.
Today, it's the lowest tax in the nation. And Missouri is one of just three states — along with North Dakota and California — that has held cigarette taxes flat since the turn of century. In that time, other states have increasingly tapped smokers to fill budget gaps and raise money for services such as health care and education.
That could soon change. Petitions are seeking to put higher cigarette taxes on the fall ballot in all three of those holdout states, as well as Colorado.
Victories by anti-tobacco advocates would add to a surge that has already raised tens of billions of dollars for states while helping drive down the nation's smoking rate, from about a quarter of adults in 1990 to fewer than 17 percent in the most recent surveys.
From 2000 through 2014, states raised their cigarette taxes nearly 120 times, helping generate more than $85 billion of additional revenue, according to an Associated Press analysis of state-by-state figures compiled by the economic consulting firm Orzechowski and Walker, which is funded by the tobacco industry.
More than a dozen additional cigarette tax hikes have been enacted since then. They include July 1 increases that will raise West Virginia's tax to $1.20 a pack and Connecticut's to $3.90, the second highest nationally behind New York's $4.35.
In June, California became only the second state behind Hawaii to raise the legal smoking age from 18 to 21 under a new law that also regulates electronic cigarettes.
Advocates believe the timing is right for people in even the most historically hesitant states to embrace higher tobacco taxes.
"What we've seen is momentum, and I think voters are ready to take the next step," said Mike Roth, a spokesman for the Save Lives California coalition backing the ballot initiative.
Yet even in a society that has increasingly turned against tobacco, the cigarette tax initiatives are no sure thing to pass.
California voters narrowly rejected two previous tobacco tax measures, in 2012 and 2006. Missouri voters did the same to three tobacco tax initiatives over the past 14 years.
Charlie Hake, a nonsmoker who owns the We B Smokin chain of tobacco shops based in Jefferson City, said he opposes the latest proposals.
"I think that our government needs to live within its means, and any tax increase is just simply unnecessary," Hake said.
Two separate initiative petitions have been submitted in Missouri — one seeking a 23-cent-a-pack increase, the other a 60-cent hike.
A petition being circulated in North Dakota would raise the cigarette tax from 44 cents a pack to $2.20. A California initiative seeks a $2 increase to the current 87-cent-a-pack tax. The Colorado proposal would ask voters to raise the cigarette tax by $1.75 a pack to a total of $2.59.
The Campaign for Tobacco-Free Kids estimates that every 10 percent increase in cigarette prices leads to a 4 percent decline in cigarette consumption. It says smaller tax increases often have little effect, because the tax is more easily absorbed into the overall price or offset with discounts.
The potential financial hit from Missouri's proposed tax hikes has already helped persuade We B Smokin clerk Kenneth Houser, 32, to give up the cigarettes that he first started smoking at age 13.
"I've scraped by as it is," Houser explained. "More money out of the pocket, I can't afford."
Even with declining sales, states that have raised cigarette taxes have seen an increase in revenue. But in many states, that revenue surge has diminished over time, and some have failed to realize the windfall predicted.
Tobacco sellers argue that significant tax hikes ultimately drive customers elsewhere.
"People find a way to get these cigarettes via the internet or via counterfeit or via the black market or off the (Native American) reservations at a discounted price," said Mike Rud, president of the North Dakota retail and petroleum marketers associations, which oppose a potential ballot measure.
Supporters of the North Dakota initiative hope to fare better with voters than they did with lawmakers, who defeated higher cigarette taxes last year. In 2008, voters approved an initiative earmarking part of the state's tobacco settlement proceeds toward anti-tobacco programs. Four years later, they banned smoking in most workplaces.
A recent poll by the Public Policy Institute of California found two-thirds of likely voters favor increasing the state's cigarette tax to fund health care.
But pre-election polls also found similar levels of general support for tobacco tax increases in California in 2006 and 2012 before the measures were narrowly defeated.
Opponents led by big tobacco companies outspent supporters 4-to-1 to help turn public opinion against the measures. Supporters had sought a $1 a pack tax hike to fund cancer research in 2012 and a $2.60 increase in 2006 to benefit health care, anti-tobacco efforts and other programs.
The task for tax opponents is to "convince voters that there's some fatal flaw, that it's not doing what they had intended or hoped for it to do, or that there's some reason to question the people who are supporting it," said Mark Baldassare, president and survey director for the institute.
Such strategies already are at work in Missouri, where big tobacco and smaller cigarette manufacturers are squaring off over two potential November ballot proposals.
One initiative would phase in a 60-cent-a-pack tax hike while also imposing a 67-cent-a-pack surcharge on cigarettes from companies that did not participate in a 1998 legal settlement with states. Many of those comparatively smaller companies currently sell lower-priced cigarettes.
The campaign for the tax hike has been largely financed by Reynolds American Inc. — the parent company for Camel, Newport and Pall Mall cigarettes — because it could end the price advantage of smaller companies.
A separate initiative proposing a phased-in 23-cent-a-pack increase is backed by discount cigarette makers and retailers, who hope it will satisfy calls for higher taxes without significantly affecting sales.
If voters approve both initiatives, Missouri's tax would gradually climb to $1 a pack.
The Campaign for Tobacco-Free Kids opposes both measures, asserting they don't go far enough. It would be better to leave the tax unchanged, spokesman John Schachter said, because doing so would "improve the chances of a significant increase in the future."
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