The cigarette tax increase Kansas legislators approved in June to help close a budget gap has not dissuaded people from buying smokes in Kansas — at least not yet.
The state cigarette tax climbed from 79 cents per pack to $1.29 per pack on July 1, an increase of 63 percent. Tax revenue from cigarette sales for July 2015 was up 64 percent over July 2014, which means people purchased about the same amount of cigarettes in Kansas as they did before the tax hike, if the underlying cost of a pack of cigarettes stayed relatively close to last year’s price. (Data on the average price of a pack of cigarettes in Kansas last month is not yet available.)
That’s significant, because the prospect of higher taxes spurring Kansans to quit was used as an argument both for and against the tax hike.
But Frank Chaloupka, a professor at the University of Illinois at Chicago who has studied cigarette taxes in many states, cautioned against drawing conclusions based on one month of data.
“The monthly figures tend to have a lot of variability,” he says.
Chaloupka says the July 2014 revenues might have been lower than normal, which would mask any reduction in smoking rates in the July 2015 receipts when the two are compared. Kansas cigarette tax collections from July 2014 were 7.3 percent lower than July 2013 despite no change in tax rates, which would support his hypothesis.
Too early to assess
Public health advocates had hoped for a tax increase of $1.50 per pack, saying the higher increase would reduce smoking rates. But legislators looking to balance the budget long-term worried that driving down smoking rates too much ultimately would cost the state tax revenue.
Others argued against using the tax code for “social engineering” and expressed concern that cigarette shoppers in border counties would head to Missouri. Kansas’ neighbor to the east has the nation’s lowest cigarette tax rate at 17 cents per pack, although efforts are under way there to increase the tax.
The American Heart Association’s Midwest branch was one of several high-profile health groups that pushed for the $1.50-per-pack cigarette tax hike but still hope to see some reduction in smoking rates from the 50-cent increase that passed.
“Many years of experience with cigarette tax increases in Kansas and other states show us that the smoking rate will decline — especially among youth — and the state will benefit from increased revenue,” says Kevin Walker, the association's regional vice president of advocacy. “This is exactly what we projected would happen when discussing this with lawmakers, and we are confident our projections will play out as predicted.”
Smokeless tobacco sales higher
The first month’s cigarette tax collections under the new rate were almost precisely on par with what the Kansas Department of Revenue estimated would come in.
The surprise came in revenue from smokeless tobacco products. Revenues from those products — which did not see a tax increase — was 22 percent higher than predicted, at $763,000 last month.
While products like chewing tobacco and snuff remain a small piece of the state’s tobacco puzzle, use of them is growing in Kansas and the rest of the country.
According to the U.S. Centers for Disease Control and Prevention, use of smokeless tobacco products bottomed out in 2000 and has since been on the rise.
Andy Marso is a reporter for KHI News Service in Topeka, a partner in Heartland Health Monitor.