The chairman of the Senate committee working on a plan to address the state’s projected budget deficit is confident that a tobacco tax increase will be a part of the final package.
However, public health advocates are concerned that the increase won’t end up being large enough to significantly lower smoking rates and reduce expenditures on smoking-related illnesses. They continue to favor the proposal that Gov. Sam Brownback announced at the beginning of the session to increase the cigarette tax by $1.50 per pack.
The governor’s proposal would raise the tax on a pack of cigarettes from 79 cents to $2.29, which would generate about $80 million of the approximately $420 million still needed to balance the budget in the fiscal year that starts July 1.
But Sen. Les Donovan, a Wichita Republican and chairman of the Senate Committee on Assessment and Taxation, said the governor’s proposal is too steep for most lawmakers.
“I don’t think the $1.50 will fly — I really don’t — and I’ve told the governor that,” he said.
Even so, Donovan expects the final revenue package will include some kind of a per-pack cigarette tax increase, either $1 or 50 cents.
“I think that’s pretty much going to happen and also maybe a small increase on liquor taxes, I think that will happen too,” he said.
A $1 per-pack increase would generate $63.5 million, according to the Kansas Department of Revenue. An increase of 50 cents per pack would raise $40.4 million.
“I don’t think the $1.50 will fly — I really don’t — and I’ve told the governor that.”- Sen. Les Donovan, a Wichita Republican and chairman of the Senate Committee on Assessment and Taxation
Donovan also said lawmakers are likely to consider expanding the tobacco tax to include e-cigarettes, which are electronic devices that deliver a nicotine kick to users in a vapor.
“If we get around to putting a tax on e-cigarettes, it’s going to be substantially lower than the tax on a pack of cigarettes,” he said. “We want people (who smoke) to move to the e-cigarettes because they seem to be healthier.”
Researchers studying the potential health hazards of e-cigarettes haven’t reached definitive conclusions on that point. One recent study found little evidence for the commonly held belief that e-cigarettes can help tobacco smokers to quit.
Taxing e-cigarettes likely would generate only $5 million to $10 million in additional revenue, according to the Kansas Legislative Research Department. The relatively small return, coupled with questions about whether the federal government intends to regulate the industry, may cause legislators to wait until next year to take up the issue of taxing e-cigarettes.
Most of the additional revenue needed to close the budget gap would be generated by an increase in the statewide sales tax, according to legislators and lobbyists familiar with what Brownback and legislative leaders are negotiating. However, a significant number of legislators continue to favor slowing, revising or reversing some of the income tax cuts approved in 2012.
A coalition of public health advocates is backing Brownback’s tobacco tax proposal because they say it would keep about 50,000 Kansans from starting or continuing to smoke and over time reduce the $1.12 billion annually that it costs to treat tobacco-related illnesses in the state, including $237.4 million in KanCare payments.
KanCare is the name of the state’s privatized Medicaid program.
Reagan Cussimanio, a lobbyist for the American Cancer Society’s Cancer Action Network, said coalition members would support Donovan’s compromise of a per-pack increase of $1 but not anything less.
Cussimanio said increasing the tax from the current 79 cents to $1.79 per pack still would produce “discernable health benefits.” But, she said, the tobacco companies’ ability to manipulate the price of cigarettes through coupons and other marketing techniques would virtually offset a 50-cent increase per pack.
“The health benefits at that level are very small,” she said.
Like Donovan, Cussimanio said coalition members remain optimistic that a substantial increase in the tobacco tax will be a part of whatever revenue plan the Legislature approves to deal with the budget situation.
“We’re hopeful that this will be a part of the final package,” she said. “It is the only tax proposal that would produce a savings for the state because of the health savings through the KanCare program and through employers seeing savings through their insurance.”
The tobacco industry is opposed to any increase, contending that it will affect mainly middle- and low-income Kansans.
Many legislators also worry that any increase will hurt Kansas convenience stores and other tobacco marketers that operate in areas bordering Missouri, which at 17 cents per pack has the nation’s lowest cigarette tax.