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At the October 17 meeting of the Chamber’s Board of Directors, the board voted to oppose two statewide proposals that will appear on the November 8 ballot: Amendment 3 and Proposition A.
Both proposals would increase Missouri’s tobacco tax by different amounts with funds directed at different purposes. Missouri’s current 17-cent tax rate is the lowest in the nation, and Missouri is one of only three states that has not raised taxes on tobacco in the last decade.
Amendment 3 is a proposed amendment to the Missouri Constitution that would increase taxes on cigarettes each year through 2030, to a total increase of 60 cents per pack. When fully implemented, the tax is expected to generate $305 million annually. It also would create a fee, paid by cigarette wholesalers, of 67 cents per pack, increasing by 3 percent annually.
Proponents argue that implementing the 67 cent per pack surcharge would close an $80 million “loophole” for small tobacco companies that was created in the Tobacco Master Settlement Agreement mandating small tobacco companies from making payments to help offset Medicaid costs. Revenue generated from the proposal would be deposited into a new fund that would primarily be directed to fund early childhood programming statewide through a statewide governing board.
Proposition A is a statutory tax increase, and would increase tobacco taxes in 2017, 2019 and 2021 for a total increase of 23 cents per pack of cigarettes and is expected to generate $100 million annually. The increase in funds would be directed toward transportation infrastructure projects.
The Chamber’s board of directors was in strong agreement about the critical need for additional funding for both early childhood programs and transportation infrastructure. However, the Chamber’s opposition to the proposals was based on a number of factors.
One of the issues with Amendment 3 is that it was drafted as a constitutional amendment, which could result in unintended consequences that would be difficult to address after its passage. The concern over the constitutional nature of the proposal was exacerbated by the fact that the proposal language was flawed, as acknowledged by proponents and opponents alike. The inability to change the language after its inclusion in the constitution, as opposed to a statutory change or a proposal with a sunset provision, does not allow for re-examination if tobacco tax revenues decrease in the future, which could unintentionally negatively impact K-12 funding.
There also was concern regarding the structure and process for appointing the governing board, establishing grant criteria and administration of awarding the grants, all of which remain unclear. There was concern about taxpayer dollars being distributed by an unnamed board through an uncertain process. The Chamber is joined by dozens of other business, education and health organizations in our opposition to Amendment 3.
While Proposition A appears to fund transportation, the board did not believe it was a sincere attempt to do so, or to discourage smoking. The board saw this as an attempt by cigarette wholesalers and tobacco firms to distract from Amendment 3. In addition, the tax would generate very little for transportation compared to the overall need. It also contains a “poison pill” clause that would repeal the tax if a measure to increase any tax or fee on cigarettes or other tobacco products is certified to appear on any local or statewide ballot.
There was skepticism based on the fact that various aspects of the tobacco industry are funding both of these initiatives, and concern that neither proposal would direct funds to help fund the public health crisis created by the use of tobacco products.
The Chamber has a long history of supporting funding for pre-k and transportation infrastructure and will continue to seek solutions to address the need for access to quality early childhood education and to fund Missouri’s transportation infrastructure.