Taxes on tobacco

This infographic compares the Missouri tobacco tax average to the national tobacco tax average and how much Missouri Medicaid spent compared to how much it gained.

Of the 50 states in the U.S., Missouri has the lowest tobacco tax of all. Well below the national average of $1.79, the Missouri tobacco tax is 17 cents, according to the Tax Foundation and Department of Revenue. In fact, the tobacco tax in Missouri has remained at 17 cents since 1993. At that time, the national average was 28 cents.

For over 50 years, tobacco use has been linked to serious health problems, such as lung cancer and heart disease. Missouri ranks 9th and 10th in rates of these diseases, respectively. 

Tom Kruckemeyer, an economist at the Missouri Budget Project and former Chief Economist for the Missouri Office of Administration/Division of Budget & Planning, wrote a report on tobacco in Missouri titled, “Misery in Missouri: How the Alliance of Big Tobacco and Missouri Politicians Keep Smoking-Induced Deaths at Unacceptable Levels.”

Kruckemeyer, whose parents both suffered from tobacco-related illnesses, has a personal stake in the cause. 

“My father dropped dead of a heart attack when I was 12 years old and I later learned it was probably because he was a smoker,” Kruckemeyer said. “My mom actually lived fairly long but she was in poor health much of her life because she was a pretty heavy smoker.”

In his report, Kruckemeyer explains the relationship between Missouri politicians, the tobacco industry and the health costs which arise from tobacco-related illnesses.

According to the report, tobacco use is a net drain on the economy, as Medicaid costs far outweigh the revenue coming in from the tobacco tax. In 2019, Missouri Medicaid spent $295.8 million dollars treating tobacco-related illnesses and only collected $72.9 million in tobacco taxes.

David Mitchell, an economics professor at MSU, said the perception of the cost of smoking-related medical treatment fails to account for the lack of social security collection at the end of a smoker’s life. 

“From society’s standpoint, it’s    actually optimal for people to work until they’re 65 and then die,” Mitchell said.

From both a public health and economic perspective, raising the tobacco tax could prove beneficial. 

If Missouri legislators were to increase the tobacco tax, they could potentially deter smokers and generate state revenue to cover the costs of tobacco-related deaths, allocate funds to anti-tobacco efforts and begin to invest in other government funded programs. 

However, Mitchell said politicians who advocate raising the tax to increase revenue and curb smoking have two competing goals. 

“Typically what people will do is they’ll say they’re going to increase the tax on tobacco to raise revenue and get people to stop smoking,” Mitchell said. “But if people stop smoking, you can’t raise revenue.”

Mitchell said he does not think anyone should smoke because of the obvious health issues smoking can cause, but legislators may look at the issue from a monetary standpoint.

“You want to raise revenue in such a way that you don’t want the tax to be so high that it discourages people from smoking,” Mitchell said. 

In 1956, Missouri first implemented a state tax on tobacco at 2 cents per pack. Adjusted for inflation, the rate of taxation in Missouri is lower than it has ever been. In proportion to 1956 dollars, the 2018 tax rate would be 1.8 cents per pack of cigarettes. 

In 2016, a measure known as Constitutional Amendment 3 was proposed to increase the tobacco tax to 23 cents but was defeated.

Top politicians in Missouri state government have accepted considerable amounts of campaign money from the tobacco industry. For example, Gov. Mike Parson accepted $105,000 in his 2016 run for lieutenant governor, according to Followthemoney.org, a nonprofit organization which tracks campaign contributions.

Similarly, 33 out of 34 of Missouri’s state senators have accepted campaign money from tobacco interest groups, according to Follow the Money.org and Kruckemeyer’s tobacco report. Sen. Brian Williams is the only Missouri State Senator with no recorded tobacco contributions.

“It’s pretty bipartisan, democrats and republicans,” Kruckemeyer said. “They all apparently think this is okay and they take the money and do pretty much nothing about any of these problems.”

Mitchell said he does not think there is a correlation between politicians accepting campaign money from the tobacco industry because there have been ballot measures to raise the tax but they have not passed.

“It’s really a matter of, ‘I already know voters are going to reject this anyway, I’ll just go ahead and take the money,’” Mitchell said.

Mitchell said governmental skepticism is one of the reasons voters don’t vote for tax increases.

“Everyone knows that basically once the tax revenue is in there, the government can change their mind and use the tax revenue from cigarettes for something else,” Mitchell said.

Kruckemeyer agrees.

“To be fair, Missouri is a very low tax state,” Kruckemeyer said. “There’s a lot of people who are just against anything that brings more money into the government.”

Mitchell said the taxation of goods like tobacco and alcohol can appear to be politicians guiding social policy.

“If you raise the tax high enough, you can deter anything,” Mitchell said. “The problem is again, you aren’t going to raise any revenue from it.”

Missouri, however, does not grow or manufacture a considerable amount of tobacco. The top three tobacco producing states, North Carolina, Kentucky and Virginia, have higher taxes on tobacco than Missouri, North Carolina at 57 cents, Kentucky at $1.10 and Virginia at 30 cents. 

If Missouri were to raise the tax to North Carolina’s rate, the state government would receive $122 million in tax dollars. If Missouri were to raise the tax to Kentucky’s rate of $1.10, the state of Missouri would receive $389 million that could possibly go toward anti-tobacco initiatives, treating tobacco related illnesses, infrastructure and government funded programs. 

Part two of this report is coming soon.