Pat Myers, manager at the QuikTrip at 1020 E. 23rd St., stocks the cigarette shelves Thursday. A proposed increase in the cigarette tax would add about 50 cents to the cost per pack. The tax, if approved, would bring in another 0 million per year in state revenue.

Per pack allocation now

A green insignia – no bigger than a shirt button – is smack on the bottom of every cigarette pack sold in Kansas.

You could go through a hundred packs of cigarettes without seeing it. Your pocketbook, however, notices every time you buy.

The insignia is the state’s stamp indicating that Kansas’ 79-cent tax on cigarettes has been paid. It’s a cost that gets placed on packs at cigarette warehouses, but the price is born fully by the consumer.

Bringing in more than $115 million a year, the cigarette tax is no small matter in Kansas. It makes up about 2 percent of the general fund, the giant pot of money used to pay for everything from education to social services.

If the Kansas Health Policy Authority Board gets its wish, the little green insignia will pack more of a punch next year. About 50 cents more.

The board is proposing, as the backbone in a plan to make Kansans healthier, to use money from an increased cigarette tax to encourage prevention and provide better health care for low-income residents and children. The added 50 cents should bring in an additional $50 million a year.

For lawmakers, a cigarette tax hike can be as seductive as Joe Camel to a roomful of teenagers.

For starters, a cigarette tax is paid by roughly 20 percent of the population. So, it’s a relatively easy sell to the remaining (nonsmoking) 80 percent.

And, there is the draw that bumping up the price will discourage smokers from buying more packs. Not to mention, politicians can make a strong case for the tie between cigarettes and the toll smoking takes on the state’s burden of health care costs.

In the past three years, 23 states have raised their tax on cigarettes. The U.S. Congress has discussed increasing its cigarette tax by 61 cents to help cover its children’s health insurance program.

“I think states recognize it’s a triple win,” KHPA executive director Marcia Nielsen said. “You are improving health outcomes. You are saving the state dollars. And at the same time, you are bringing in additional dollars to improve the health in your state.”

Taxing concerns

But critics say there are many reasons why the cigarette tax isn’t as smooth as the proponents would have you believe.

No. 1, higher taxes will lead smokers to buy cigarettes online, across state borders and on American Indian reservations, where taxes are substantially lower. It could lead to an underground market.

Eventually, if public health plans succeed and everyone stops smoking, that source of tax revenue will run out.

“They want to raise the tobacco tax and yet ban smoking. It’s an interesting parallel with regard to if you do one, if you increase the tax of one you are going to reduce smoking, but also if you ban tobacco you are also going to see less revenue coming into the state,” said Tom Palace, who is with the Petroleum Marketers and Convenience Store Association of Kansas.

Convenience stores bring in 23 percent of their sales from tobacco products.

If the proposal passes and Kansas’ cigarette tax goes to $1.29 a pack, it would be a good dollar more than what neighboring Missouri levies. At 17 cents per pack, Missouri has the second lowest state cigarette tax in the country.

But, Kansas doesn’t have to raise its taxes for Missouri to benefit. That already happens.

Ron Leone, executive director for the Missouri Petroleum Marketers and Convenience Store Association, said some cigarette sellers in Kansas City, Kan., shut down and crossed borders after Kansas’ last cigarette tax increase in 2003. And when smokers find cheaper cigarettes across state lines, they end up spending more on gas and food there, too, Leone said.

QuikTrip moved one of its Kansas City, Kan., stores 100 feet into Missouri to take advantage of that state’s tax breaks, company spokesman Mike Thornbrough said.

Of the company’s 73 stores in the Kansas City metro area, less than a third are on the Kansas side.

“The return in Missouri is presently much greater,” Thornbrough said.

And, Missourians like it that way.

Twice in the past five years, Missouri voters turned down ballot measures to boost the cigarette tax to help cover health care costs.

Leone’s organization worked to persuade residents that a higher cigarette tax would stop drawing over-the-border traffic.

“It’s a ridiculous proposition. The more you increase taxes, the less people smoke and the less money you generate. And, you are funding programs that by definition increase exponentially when it comes to health care,” Leone said. “Who is going to end up picking up the tab? The middle class and regular Joe taxpayer.”

Kansas’ revenue

For every pack of cigarettes sold in Kansas today, about 42 percent of the money goes to the government.

Smokers just don’t pay the state’s cigarette tax, but also sales tax, the federal cigarette tax and the 47 cents that Big Tobacco companies say they tack on to every pack to cover settlement payments they owe from state lawsuits.

While Kansas receives about $169 million each year from tobacco revenue, it spends less than $1 million in programs that target smoking prevention and cessation.

The amount is far less – only 5.5 percent – of what the Centers for Disease Control and Prevention says Kansas should be spending. It’s a ratio that the Campaign for Tobacco Free Kids doesn’t much like, but spokesman Joel Spivak said Kansas is the norm.

Prevention – when funded – keeps teenagers from smoking, saves lives and reduces health care costs.

“If every state in the country would properly fund a comprehensive tobacco prevention program, they would begin to see enormous health care savings,” Spivak said.

Dr. Jim Barnett, a Republican state senator from Emporia and internal medicine physician, believes that Kansas is already putting cigarette tax revenue before prevention.

“It’s almost criminal that not more is spent,” Barnett said.

For its part, the health policy authority has recommended improving Medicaid’s tobacco cessation program. It also wants to ban smoking statewide in public places.

Some say it works

When it comes to boosting the cigarette tax, two things are clear: people smoke less, and states bring in more revenue.

That’s according to Eric Lindblom, director of policy research for the Campaign for Tobacco Free Kids.

Studies show that a tax increase by 10 percent reduces overall cigarette consumption by 3 percent or 4 percent, Lindblom said. The numbers are even higher for teenagers and pregnant women.

Because cigarette taxes cut down on smoking and smoking creates high health care costs, public support for the tax has grown, said Bart Hildreth, a regents distinguished professor of public finance at Wichita State University.

“It is not just a revenue-raising scheme, if you will; it is a direct attempt to reduce consumption of a commodity that has now been acknowledged to have negative health consequences,” he said.

Those health care costs then get passed to the state through Medicaid, the federal government through Medicare and employers through health insurance.

“There is a cost to society,” Hildreth said.

So far, every state that has instituted a cigarette tax hike – including New Jersey with the highest tax of $2.58 a pack – has seen a increase in revenue, Lindblom said.

The loss in revenue from people dodging the higher tax is small compared with the amount of money the new tax generates, Lindblom said.

Steve Brunkan, a financial economist with the Kansas Department of Revenue, said that most Kansas smokers buy cigarettes one pack at a time.

“The first month after the tax increase, they pre-buy at the lower level and get by for a couple of weeks. They go buy on the Internet and drive to Missouri,” Brunkan said. “But after a month or two months of that, they are back to their old habit of running down to the local Quick Shop and buying a pack of cigarettes.”

Even as more people stop smoking, Lindblom said, states can maintain their revenue stream by continually increasing the tax. States have yet to bump up against the ceiling where taxes are so high that revenue drops off, he said. That means there is room to tax even more.

“It should be an automatic no-brainer for state legislators,” Lindblom said.

Yet, the health policy authority’s recommendation to boost the tax will be anything but automatic.

When the Kansas legislative session starts next year, the cigarette tax is expected to be among the more controversial issues.

Ray Davis, who sits on the health policy authority board, said if legislators aren’t willing to back the tobacco tax, they have to face the tougher question of how else to fund their recommendations.

“The legislature has to own up to the reality of (the) two things that the tobacco tax does,” Davis said, “and that is discourage behavior and raise revenue to allow us to do some things that are very necessary.”