An Analysis of Missouri Constitutional Amendment 3

Introduction

Missouri Constitutional Amendment 3 will allow voters to decide whether to increase the current tax on cigarettes and direct the revenue from the tax increase toward early childhood education programs.  Although on its face it seems to be a worthy cause, there is a broad spectrum of opposition to Amendment 3.  Such opposition requires a careful look at the actual language and intent of the proposal.

Ballot Language

Constitutional Amendment 3

[full text] 

[Proposed by Initiative Petition]

Official Ballot Title:

Shall the Missouri Constitution be amended to:

• increase taxes on cigarettes each year through 2020, at which point this additional tax will total 60 cents per pack of 20;
• create a fee paid by cigarette wholesalers of 67 cents per pack of 20 on certain cigarettes, which fee shall increase annually; and
• deposit funds generated by these taxes and fees into a newly established Early Childhood Health and Education Trust Fund?

When cigarette tax increases are fully implemented, estimated additional revenue to state government is $263 million to $374 million annually, with limited estimated implementation costs. The revenue will fund only programs and services allowed by the proposal. The fiscal impact to local governmental entities is unknown.

 Fair Ballot Language:

A “yes” vote will amend the Missouri Constitution to increase taxes on cigarettes each year through 2020, at which point this additional tax will total 60 cents per pack of 20. This amendment also creates a fee paid by cigarette wholesalers of 67 cents per pack of 20 on certain cigarettes. This amendment further provides that the funds generated by these taxes and fees shall be deposited into a newly established Early Childhood Health and Education Trust Fund.

A “no” vote will not amend the Missouri Constitution relating to taxes and fees on cigarettes.

If passed, this measure will increase taxes on cigarettes.

Background

Summary of Amendment 3

Amendment 3 was certified for the November 2016 ballot after a successful ballot initiative petition.  The committee formed in support of the amendment, Raise Your Hands for Kids, has received over $2.7 million from RAI Services, Inc., the parent company of one of the largest tobacco companies, R.J. Reynolds. See the October Quarterly Report of Raise Your Hands for Kids.

Amendment 3 proposes to phase in a $0.60 per pack increase to Missouri’s current $0.17 per pack tax.  It also implements a $0.67 per pack “equity assessment fee” on certain cigarette wholesalers.  The revenue generated by these increases is to be deposited in a new “Early Childhood Health and Education Trust Fund.”  Funds from the new fund are to be distributed as follows: at least 75% as grants to improving the quality and increasing access to Missouri early childhood programs, 10-15% as grants to hospitals and healthcare facilities to improve access to early childhood health and development programs, and 5-10% as grants to smoking cessation and prevention programs for pregnant mothers and youth.

Missouri’s Cigarette Tax

At $0.17 per pack of 20, Missouri’s cigarette tax is the lowest in the nation.  The next lowest is $0.30 per pack in Virginia.  The cigarette taxes of our surrounding states range from $0.60 per pack in Kentucky to $1.98 per pack in Illinois.

The current tax of $0.17 per pack has been in place since 1993, when the General Assembly passed legislation increasing the existing tax by $0.04.  Since 1993 there have been two attempts, in 2002 and 2006, to raise the cigarette tax through the initiative petition process. Both attempts were narrowly defeated.

Analysis

Effect on Tobacco Companies

Amendment 3 proposes to not only increase the tax on a pack of cigarettes by $0.60, but also seeks to impose a $0.67 “equity assessment fee” on wholesalers for each pack of cigarettes manufactured by a “non-participating manufacturer” as defined in the 1998 Master Settlement Agreement.  The Master Settlement Agreement was a deal reached between 46 states and the five largest tobacco manufacturers, wherein the states forfeited future legal claims against the participating manufacturers in exchange for annual payments from the participating manufacturers to compensate for healthcare costs of tobacco-related illnesses. For more information, see http://publichealthlawcenter.org/sites/default/files/resources/tclc-fs-msa-overview-2015.pdf.

The equity assessment fee in Amendment 3 is intended to level the playing field between “big tobacco” and “little tobacco.”  This provision, maybe more so than any other in the proposal, leads one to believe that perhaps the stated intent of Amendment 3 isn’t as simple or honest as being “for the kids.”  A proposal funded by a big tobacco company enshrining in the state constitution such a big benefit to itself and the other large tobacco companies certainly raises a red flag.

Effect on Abortion and Stem Cell Research

Much of the recent disagreement on Amendment 3 is a result of references to abortion services and stem cell research in section 54(b)(2).  The relevant text states that “None of the funds collected, distributed, or allocated from the Early Childhood Health and Education Trust Fund shall be expended, paid or granted to… [an] outpatient health care facility that provides abortion services, unless such services are limited to medical emergencies.” Further, no funds shall be used for “human cloning or research, clinical trials, or therapies or cures using human embryonic stem cells.”

The language in this section is in large part the reason the opposition to Amendment 3 is so diverse.  Pro-life supporters, including Concerned Women for America and United for Missouri, take issue with inserting the term “abortion services” into the state constitution for the first time.  Proponents of stem cell research, including Missouri Cures, do not want language in the constitution that could be interpreted as restricting research efforts.

Raise Your Hands for Kids commissioned a legal opinion from retired Missouri Court of Appeals Judge James R. Dowd in relation to the reference to stem cell research.  Judge Dowd opined that the language of Amendment 3 does not conflict with existing constitutional protections for stem cell research.  The opinion is not binding, however, and the issue is still open to legal challenge.

Missouri Right to Life has taken a neutral position on Amendment 3, with the belief that the language is sufficient to ensure no funds from the tax increase go towards funding abortion services.  We are more cautious and, at the very least, cannot support an amendment inserting language into the constitution that arguably legitimizes abortion in our state.

Effect on Early Childhood Education

Perhaps most importantly, we should consider if the proposed amendment will prove effective in achieving its stated goal of improving the health and education of young children in Missouri.

The Show-Me Institute’s Michael McShane provides a thorough analysis of Amendment 3, specifically through an education policy standpoint, in his recent essay “Amendment 3: The Good, the Bad, and the Ugly.” McShane writes that, while there are good aspects of the amendment, including making funding available for both public and private pre-K, we should be cautious in lauding all early childhood programs based on the results of a few often-cited studies.  Not all pre-K programs are equal, and it would be imprudent to assume our existing early childhood programs are achieving the same results as those studies.

McShane further notes that other areas of the amendment may prove troublesome.  For example, the language is vague and allows a non-elected commission to determine what is “fair and equitable” for purposes of awarding grants.  Additionally, what happens to the funding for early childhood programs if smoking rates continue to decrease, as they have over the last half-century?

Conclusion

In our opinion, the language of Amendment 3 proves too problematic to support.  There are questionable references to abortion and stem cell research.  It contains a prohibition on using the funds generated by the tax increase for “tobacco related research of any kind.”  Using the state constitution to enshrine a tax benefitting big tobacco companies is wrong.  Even worse, the “intended” beneficiaries, children, receive less of a benefit than the real beneficiaries, R.J. Reynolds and the other “participating manufacturers.”

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