Missouri’s Low Cigarette Taxes (And Why They Should Stay That Way)
The St. Louis Post-Dispatch recently published an article lamenting the fact that Missouri has the nation’s lowest taxes on cigarettes. They are not alone; the Kansas City Star editorial that I wrote about on April 3 pushed for the state to raise the cigarette tax. The Post-Dispatch and Star articles differ on the reasons they want the cigarette tax increased; however, does it occur to people that there might be negative consequences to raising the cigarette tax?
For instance, stores in Missouri that are on the border with other states attract business from people shopping here in order to take advantage of the state’s low excise taxes. Show-Me Institute intern Amy Lutz recently wrote an op-ed that details the impact such a tax hike could have on interstate commerce.
Also, an increased tax on cigarettes would disproportionately harm the poor. The Post-Dispatch article mentions that raising taxes is an effective method for getting people to quit smoking. Do increased cigarette taxes result in significantly fewer smokers? If smoking is bad for us, and it is OK to increase taxes on that, where does it end? What next, enormous taxes on sugar to finance heavy broccoli subsidies? What about an obesity tax? Isn’t there something offensive about government micromanaging our lives?
Raising taxes have never been proven to lower smoking rates. Smoking rates have been declining for decades. Ireland is a excellent example of how this doesn’t work. They have strict smoking bans and very high taxes. The result, smoking rates have been climbing (yes even higher then Missouri) and tax income has been reduced. Their markets have been flooded with black market cigarettes.
Two other important issues have been pushed to the background. First is the very reason anti-tobacco groups are pushing for the tax increase. Under their proposal, they will reap 20% of the tax. They claim its for stop smoking programs. In reality it will be used to pay themselves, lobby local government and pester the very people that are paying their salaries.
The other issue is the OTP (other tobacco products)such as cigars. That tax is the is not the lowest in the nation. It will be raised to nearly 40% of wholesale price (currently 10%). Cigar shops now are at a disadvantage with that tax. They have to compete with internet cigar sales. Nearly all of which come out of Florida and Penslyvania. Those states have zero tax on OTP.
Comment by Tony Palazzolo — April 24, 2012 @ 12:41 p.m.
One other point on the increased taxes. St Louis City, St Louis County and all border counties should oppose this tax. The much hyped income from increased taxes is actually a tax loss at the city and county tax level. Illinois residents who now cross the river do so because its far cheaper to purchase cigarettes in Missouri. Not only do they pay the state excise tax, but also the retail tax. If they no longer cross the border, then local governments will lose the retail portion.
Comment by Tony Palazzolo — April 25, 2012 @ 10:26 a.m.
Is there any way to measure how much money is coming into Missouri coffers thanks to the lower taxes? I am sure it is some, but, from a strict ‘taxes as money grab’ analysis, how much money are we talking about? Does anyone know? I imagine there is a labor intensive way to figure it out, but has it been done? All questions and no answers, sorry.
I understand that this is a philosophical battle as well. No one likes to pick on a minority to pay more taxes.
Comment by Papillon — April 25, 2012 @ 11:35 a.m.
If the state taxes go up I’m sure the federal taxes will also go up and continue to go up. This is another form of government control. If they don’t want you to do something they continually raise the taxes on the product until you can’t afford it.
How many people know that a cartoon of name brand cigarettes cost around %50.00?
Comment by Bob Keough — April 25, 2012 @ 4:25 p.m.
Papillon,
I don’t think there is a way to know the exact amount spent here by out-of-staters on smokes, gas, etc. We do know that Missouri has more commuters that come into the state each day than any state outside of the east coast, although that number is a little dated since it relies on 2000 census data. The 2010 census commuter data won’t be available until next year. I still think the 2010 data will show Missoouri with a heavy influx of commuters from out-of-state, which is exactly why low excise taxes work for Missouori. Make the quick purchases for things like gas or cigarettes something people who come into Missouri make a point of doing while they are in Missouori.
Comment by David Stokes — April 25, 2012 @ 5:06 p.m.