October 9, 2012

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Ballot Preview: Cigarette Tax (Proposition B)
Among the items on the November ballot is one that would raise taxes on tobacco products. Proposition B proposes a 760 percent increase to the cost of a pack of cigarettes of 73 cents, from 17 to 90 cents. Missouri currently has the lowest tax on cigarettes in the country. In addition, other aspects of the tobacco industry — such as cigarette papers, loose tobacco and cigars — would also see a raise in taxes. The beneficiary would be education funding. On the Nov. 6 ballot, folks will see this: Official Ballot Title Proposition B [Proposed by Initiative Petition] Official Ballot Title: Shall Missouri law be amended to: Create the Health and Education Trust Fund with proceeds of a tax of $0.0365

per cigarette and 25 percent of the manufacturer's invoice price for roll-yourown tobacco and 15 percent for other tobacco products; Use fund proceeds to reduce and prevent tobacco use and for elementary, secondary, college, and university public school funding; and Increase the amount that certain tobacco product manufacturers must maintain in their escrow accounts, to pay judgments or settlements, before any funds in escrow can be refunded to the tobacco product manufacturer and create bonding requirements for these manufacturers? Estimated additional revenue to state government is $283 million to $423 million annually with limited estimated implementation costs or savings. The revenue will fund only programs and services allowed by the proposal. The fiscal impact to local governmental entities is unknown. Escrow fund changes may result in an unknown increase in future state revenue. Fair Ballot Language: A “yes” vote will amend Missouri law to create the Health and Education Trust Fund with proceeds from a tax on cigarettes and other tobacco products. The amount of the tax is $0.0365 per cigarette and 25 percent of the manufacturer's invoice price for roll-your-own tobacco and 15 percent for other tobacco products. The Fund proceeds will be used to reduce and prevent tobacco use and for elementary, secondary, college, and university public school funding. This amendment also increases the amount that certain tobacco product manufacturers must maintain in their escrow accounts, to pay judgments or settlements, before any funds in escrow can be refunded to the tobacco product manufacturer and creates bonding requirements for these

manufacturers. A “no” vote will not change the current Missouri law regarding taxes on cigarettes and other tobacco products or the escrow account and bonding requirements for certain tobacco product manufacturers. If passed, this measure will increase taxes on cigarettes and other tobacco products. Supporters of Proposition B say the tax hike would help some folks to stop smoking, plus it would give more money to our schools. Opponents claim any tax increase, especially given our economy, is bad. On the other hand, they also point out how an uneven playing field could be created with the passage of this tax raise. There’s wording in the tobacco settlement of 1998 that requires tobacco companies to contribute millions of dollars each year to Missouri’s Medicare fund. However, the Allocable Share Release excludes those companies created, since the settlement was made 14 years ago. By revoking this loophole, smaller and newer tobacco sellers would have to provide the same amount of money every year as the so-called “big tobacco” companies. While education is a worthy cause, I will vote “no” on this issue, because now is a terrible time for such a large tax increase. Next week, I will tell you about the final proposition (Proposition E) you will see on Nov. 6.

Senator Stouffer serves the counties of Carroll, Chariton, Cooper, Howard, Lafayette, Macon, Ray, Saline, and a part of Clay. If you have questions or comments about this or any

other issue, please call toll free (866) 768-3987 or by e-mail at bstouffer@senate.mo.gov.
bstouffer@senate.mo.gov | www.senate.mo.gov/stouffer State Capitol, Room 332, Jefferson City, MO 65101 | (866) 768-3987

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