Archive for Monday, November 15, 2004

Analysis: Sebelius made ‘shrewd’ decision

Tobacco taxes may be best option for funding

November 15, 2004


— Gov. Kathleen Sebelius is facing criticism for proposing a cigarette tax increase, but other alternatives for financing her health care proposals appear even less attractive.

Sebelius says tobacco taxes are the logical source of revenue because tobacco use generates big medical costs. But her choice could prove shrewd politically largely because nonsmokers far outnumber smokers.

"If you want a bill to pass, the fewer people who hate it, the better," said House Taxation Committee Chairman John Edmonds, R-Great Bend. "She's taken the better strategy."

Sebelius needs $50 million a year for the "HealthyKansas" program she and Insurance Commissioner Sandy Praeger outlined last week.

They want the state to cover medical services for an additional 70,000 Kansans. They also propose having the state subsidize private insurance plans to make them affordable for both small businesses and their low-wage workers.

Their plan would increase the state's cigarette tax by 50 cents a pack, to $1.29. Also, the tax on other tobacco products would rise to 15 percent from 10 percent.

Tough time for taxes

Legislators in both parties said Sebelius would have a tough time selling any tax increase, given the mood of voters in this year's elections.

However, many voters also worried about rising insurance premiums and prescription drug costs, and Sebelius said nearly 300,000 Kansans remain uninsured.

"There's a sense that we absolutely need to do something," said Sen. Janis Lee, D-Kensington, a member of her chamber's tax committee. "There clearly is a public will to have a solution."

Of course, there are reasons to avoid raising tobacco taxes to pay for health care proposals.

The state raised its cigarette tax in 2002 to the current 79 cents from 24 cents to help prevent a budget shortfall. Some legislators believe adding an additional 50 cents a pack will push Kansas smokers to buy cigarettes outside the state.

'Least amount of burden'

Smokers and tobacco companies question the fairness of having a relatively small group of people pay for broad public health initiatives. A recent national study indicated about one-fifth of Kansans smoke.

"The whole thing about a fair tax system is to place the least amount of burden on the most people," said David Howard, a spokesman for the R.J. Reynolds Tobacco Co. in Winston-Salem, N.C. "This proposal does just the opposite."

Sebelius is betting Kansans would respond to raising tobacco taxes as voters did recently in Colorado, Montana and Oklahoma, where they approved large increases in cigarette taxes. Montana's tax will rise $1, to $1.70 a pack.

And other tax sources present their own problems.

Liquor, wine, beer

For example, Sebelius and Praeger could have proposed raising taxes on liquor, wine and beer.

Sen. John Vratil, R-Leawood, said he was surprised they didn't, given that excessive drinking leads to health problems and that the state last increased alcohol excise taxes in 1983.

However, others questioned whether higher alcohol taxes could support an entire health care program. The state expects to raise less than $69 million for the current budget from its alcohol excise taxes.

Raising alcohol taxes probably would touch many more Kansans than higher tobacco taxes. In February, a federal Centers for Disease Control report suggested that three in five adult Americans are at least occasional drinkers.

"Raising liquor taxes doesn't raise a lot of money, and it makes a lot of people mad," said House Minority Leader Dennis McKinney, D-Greensburg. "A lot of people want to enjoy a cold beer after a hard day's work."

Schools have first call

As another example, Sebelius and Praeger could have proposed raising sales or income taxes to pay for their proposals.

But legislators also face a debate over funding public schools. They're waiting for the Kansas Supreme Court to rule on a lawsuit challenging the constitutionality of how Kansas distributes its education dollars. Many worry that the court's decision will require an infusion of additional money.

Edmonds said public schools will have first call on any new sales and income tax dollars. He also said fewer legislators probably support a sales or income tax increase than higher tobacco taxes because far more Kansans would have to pay.

As for the cigarette tax, Edmonds said, "Nobody has to smoke, so it's a tax that nobody has to pay."

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