We here at the Show-Me Institute were very interested in Amendment 3 because the issue was so complex and multifaceted. From the funding mechanism (cigarette taxes) to the policy it would support (early childhood education) there was more to the question than met the eye.

Now the people of Missouri have spoken, and by a 60% to 40% margin (as of this moment), they soundly rejected Amendment 3.

There is much parsing of this election to be done, but I do want to offer a couple of quick reactions:

• Missouri does not like cigarette taxes. Not only did Amendment 3 fail, but so did Proposition A, a much smaller cigarette tax (by a 55% to 45% margin). These initiatives are just two in a long line of cigarette taxes that the state has voted down. At 17 cents, Missouri has one of the lowest cigarette taxes in the nation, and it appears we want to keep it that way.
• Voters can read between the lines. At first glance, it looked like Amendment 3 would win in a walk. According to Ballotpedia, the first polling on this issue back in July had the issue winning 53% to 29%. As more and more information came out and voters became more informed about the issue, that support eroded and eventually became opposition.
• Ideas matter.  Not all of the campaign finance numbers are in, but according to Ballotpedia numbers, the “Yes” campaign outspent the “No” campaign by a wide margin, $12.8 million to $5.7 million. But it was to no avail. In the end, the arguments matter more than the spending, and the proposal failed.

I don’t think we need to close the door on pre-K, though my colleague Emily Runge’s piece earlier this week has definitely caused me to temper enthusiasm for it (which I didn’t have a great deal of to begin with). We do need to think long and hard about how we structure it and pay for it.  As we argued in 20 for 2020, a voucher-based system that puts students and parents in charge is the best way to structure pre-K if we’re going to do it, and we should be skeptical of any plan that does otherwise.

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Many people have been drawn to the discussion because of the unique political situation surrounding Amendment 3. It is a cigarette tax designed to fund pre-K education that is supported by tobacco companies and opposed by the American Cancer Society Cancer Action Network. How can you not be interested by that?

But let’s cut through the fog. Politics are interesting and might get folks hooked, but ultimately it’s the policy that should concern us.

Backers have some solid reasons to support the proposal. Funds will be made available to both public and private providers, which would, in theory, provide a wider set of options than if funding was restricted solely to traditional public schools. Additionally, the drafters of the Amendment have taken steps to try and insulate the program from the forces of the educational status quo by requiring funds generated by the tax to be kept separate from general revenue and be managed by an independent board.

That said, there are reasons to be concerned about this proposal. While insulating the board from the pressure of interest groups is a laudable objective, it could mean that the board is less accountable to taxpayers. The amendment language also states that the board needs to be “equitable” in its distribution of funds. If you’ve even casually followed discussions of education finance in Missouri and Kansas, decades-long court cases can be fought over exactly what “equitable” means. Is this just opening a similar can of worms?

And all of this dances around the more central question: Even if we think that pre-K is something worth supporting, is a tax on cigarettes an appropriate way to fund it?  Cigarette taxes are extremely regressive. Poor people are far more likely to smoke than their richer peers, meaning that the poor will bear the brunt of the tax increase. Smoking is also on the decline, risking future revenue and raising the possibility that services will be cut or pressure will be put on the legislature to divert general revenue to subsidize the program.

For someone who doesn’t smoke but wants pre-K for their kids, Amendment 3 might seem to offer something for nothing. Unfortunately, nothing is free in this life, and someone is going to have to pick up the tab. Whether or not that “someone” should be a group disproportionately made up of economically disadvantaged people is worth considering.

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At first glance, I can see why folks might want to support such an effort. Smoking is bad, so we should tax it. Preschool is good so we should provide it.

Oh, how I wish it were that simple!

In my new essay, Amendment 3: The Good, the Bad, and the Ugly, I break down all of the intricate issues involved in this proposed constitutional amendment. What is the impetus for this proposal? Is there really a need to be met here? Is pre-K as big of a deal as supporters say it is? Do tobacco taxes have any downside?

I hope that the essay will increase understanding about the possible consequences of this amendment (intended and unintended) and help Missourians cast more informed votes as a result.

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Proposition A and Constitutional Amendment 3 propose to raise the state’s cigarette tax by 23 cents and 60 cents, respectively.  The first of these initiatives would use tax revenues to fund transportation infrastructure, while revenue from the second primarily would fund childhood education programs.

This sounds like a win–win; smoking would likely be reduced due to higher costs, and more funds arguably would be available for other important priorities. But as you dig deeper into the details of these proposal, some important questions immediately come to mind. For example, no more than 25% of the revenue generated from Constitutional Amendment 3 may be used for health care facilities and smoking prevention programs, a restriction that is difficult to understand. If smoking is so harmful that taxation is going to be used to discourage it, doesn’t it make sense to use the resulting revenue to help people quit or keep them from starting? 

We know that cigarette taxes are regressive by nature and tend to have larger impacts on low-income households.  The prevalence of smoking is almost twice as high among people below the poverty level than among the rest of the population, so a disproportionate amount of the tax will be collected from those least able to afford it. 

If the health risks associated with smoking are serious enough to warrant a sin tax, shouldn’t the resulting revenue be put toward services like smoking prevention programs or addiction treatment?  On the other hand, if smoking isn’t enough of a problem that the government needs to help people quit, then why should smokers be singled out for a tax to fund expenditures that benefit all Missourians?

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These days there are a lot of calls to make people pay their “fair share,” and no, we are not referring to the 1 percent. We are talking about smokers. The argument for raising the tax on cigarettes is straightforward—smoking is harmful to individuals, and though smoking is an individual decision, it impacts each of us. We all bear the brunt of additional health care costs incurred by smokers. These are what economists call negative externalities. They are, in theory, why smokers should be taxed more for their behavior—to offset their costs to society. Most proposals to raise the cigarette tax, however, seek to tax smokers to pay for unrelated programs, such as education.

For example, Erin Brower of Raise Your Hand for Kids is seeking to put a 50 cent increase on the ballot to fund early childhood programs. Missouri Treasurer Clint Zweifel has proposed an increase to fund college scholarships, an idea Missouri Attorney General Chris Koster supports. In a recent special to the Joplin Globe, Koster called for a 73 cent per pack increase. These are certainly not the first calls for increasing the tax. In the past 15 years, tobacco tax increases have appeared two times on the ballot. Each time Missouri voters have had the opportunity to tax smokers more, they have failed to do so. Why?

First, Missourians are leery of using “sin” taxes to fund other programs, especially education. This was the same tactic used to legalize gambling in Missouri. Lawmakers said the revenue from gambling would go to education. They did not tell voters, however, that the money would supplant not supplement existing funds to education. There are fears that the same would happen with proposals to raise tobacco taxes.

Second, using tobacco taxes to fund other programs simply does not make economic sense. Missouri’s lowest-in-the-nation tobacco taxes help draw in an untold number of shoppers across state lines, especially in Kansas City and along the Illinois border. These shoppers make it a point to buy their cigarettes in Missouri, thus creating sales for our local businesses and generating tax revenue for the state. Raising the tobacco tax would deter these shoppers.

Tobacco taxes also have the negative distinction of being one of the most regressive taxes. Smokers tend to be from lower-income households. At the same time, middle-income families would benefit from many of the programs created from increased tobacco taxes, such as college scholarships. Thus, if Zweifel and Koster’s proposal was implemented, low-income families would be subsidizing the college education of middle-income families. What is the “fair share” for smokers to pay for a middle-class student’s college education?

The truth of the matter is that smokers are an easy group to target. Few, except for other smokers, are sympathetic to their plight. At the same time, we all support better educational opportunities for Missouri students. Therefore, taxing smokers is a relatively easy way to raise taxes to fund educational programs.

If lawmakers are seriously concerned about the negative externalities causes by smokers, they should direct tobacco tax revenue directly back to smoking prevention programs and the Medicaid costs for smokers. That is the only logically and economically consistent use of the tax revenue.

James V. Shuls, Ph.D., is an assistant professor of educational leadership and policy studies at the University of Missouri–St. Louis and a fellow at the Show-Me Institute, where Michael Rathbone is a policy researcher.

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The truth is, Missouri voters do not hate children, or even taxation for education. Take, for example, the results of Proposition S in Saint Louis County. Even though the property taxes for schools in the county are 50 percent higher than the average school property tax rate in the state, voters approved the 19 percent property tax increase with 59 percent of the vote.

Many Missourians simply did not believe that the increased revenue from the tobacco tax would actually go to education, and for good reason. Though the drafters of the legislation said the funds would be “in addition to” funds generated by the funding formula, they inserted a provision that allowed those funds to replace general revenue when the state could not fully fund their obligations to K-12 schools. As it turns out, that is exactly the position we are in right now. Missourians simply do not do not like taxes that unfairly target one population with dubious claims that they will benefit schools.

Proponents of Prop B claim big tobacco used scare tactics to garner opposition to the measure. In fact, the opposite was true, as advocates for the tax increase suggested the revenue generated would prevent teacher layoffs and increased class sizes. Those claims, of course, are not likely to come to fruition. However, if the state continues to underfund its obligations, the result is a massive lawsuit. Unless legislators want the courts to settle the issue of education funding, they need to have some serious discussions when they return to Jefferson City.

The debate about education funding will certainly be contentious and will pit rural, urban, and suburban legislators and school districts against each other. It could also be highly productive, allowing lawmakers to tackle some of the most pressing issues in K-12 education.

For instance, legislators could work out the kinks in the intradistrict transfer bill so more students have access to high-quality schools.

They could improve transparency by ensuring the money follows the child to their school, not just to their district. This would ensure money designated for high-poverty or special needs students is actually spent on those kids and not at wealthier schools in the district.

Or, lawmakers could consider tax-credit scholarships or education savings accounts as a way to save money and ensure parents have more educational options for their kids.

To many, taxing smokers to fund education sounded like a good idea. In reality, Prop B would have done little to build a strong, sustainable education system, but it would have provided cover for legislators to avoid the tough discussions that are needed. It is possible the “no” vote was actually a blessing for education funding; it may force legislators to go to the state capital and do the difficult job that they have been elected to do.

James V. Shuls is the education policy analyst at the Show-Me Institute, which promotes market solutions for Missouri public policy.

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That is the argument that proponents of Proposition B are making in calling for a whopping 429 percent increase in Missouri’s cigarette tax (from 17 cents a pack to 90 cents). But there are good reasons for rejecting this argument.

First, tobacco taxes are regressive in nature and disproportionately harm the poor. It is wrong to place a higher tax burden on people who are least able to afford it simply because they are engaged in an activity that is not popular.

Second, no one should trust the security of the so-called “lock box.” Though Proposition B states the revenue directed to K-12 education should be “in addition to” funds from the school funding formula, it is likely the new money will replace other state funds. A provision in the bill allows tobacco dollars to be used in the school funding formula if it is underfunded, which currently it is. The lock box is already open and there is little reason to expect legislators to close it.

Third, and most importantly, more money does not necessarily mean the quality of education will improve. According to the Digest of Education Statistics, Missouri increased per-pupil spending on education by almost 40 percent in inflation adjusted dollars between 1992 and 2008. Despite that, Missouri’s achievement scores on the National Assessment of Educational Progress have remained almost flat.

Making sure our kids get a great education is a moral imperative. It is also politically popular. Yet, specifically targeting politically unpopular and vulnerable groups in order to raise money for education is the wrong approach to fixing our schools. We all know that smoking leads to a variety of health problems. But that does not give the government license to inflict punitive taxes on people engaged in a legal activity. This is behavior modification through taxation and is the equivalent of taxing milkshakes in order to fund road construction.

Real improvement in education will come from making Missouri a place that attracts business and educational entrepreneurs; a place where parents are free to choose and schools are free to innovate. Making smokers cough up more tax dollars for education will not achieve these goals and will do little to provide a strong, sustainable educational system for future generations.

Michael Rathbone is a policy researcher and James V. Shuls is the education policy analyst at the Show-Me Institute, which promotes market solutions for Missouri public policy.

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I think this is definitely an idea worth discussing. Everyone in the state would benefit from the tax cut (approximately $35 per worker, and part-time employees would benefit just as much as full-time — unless they are really part-time), and smokers would only pay more after they buy their 135th pack of smokes for the year. Basically, a pack-a-day smoker would pay an extra $60 per year in taxes under this plan, while more casual smokers would basically break even or come out ahead. (Is there anyone left alive who still smokes more than one pack a day? I mean, other than this kid, who doesn’t pay American tobacco taxes.)

The small size of the cigarette tax increase in this bill makes it immune from our criticisms that residents of other states would stop buying their cigarettes here, and thus cost Missouri that voluntary money. Of course, some marginal level of out-of-state purchases will be lost, but for the most part, Missouri’s tobacco tax would still be much lower than surrounding states. I think most of our commuters, visitors, etc., who enjoy a draw would still make a point to buy their smokes here.

I like the part of this proposal that all Missourians would benefit equally from the income tax cut. I like that casual smokers would roughly break even, and heavy smokers would only see a small tax increase. I like that out-of-state smokers would likely still continue to buy here when possible.

I do not necessarily like that a percent of the population (the smokers) are being targeted to fund a general benefit. However, we crossed that bridge a long time ago, and this proposal is far less drastic, and more equitable, than many similar proposals. I do not deny the political reality that tobacco taxes are going to be increased at some point. If that reality takes the form of a small cigarette tax hike that funds a tax cut for all Missouri workers (including the smokers), then Missouri could do a lot worse.

It is not just that the state could do worse, it is that we probably would do worse, such as some drastic cigarette tax hike that drives out-of-state buyers back home and uses the new tax money to fund a new tax credit only for films about ethanol-powered historic buildings near transit.

I think Sen. Lamping’s proposal has a lot of merit and deserves serious discussion.

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I would guess that most Illinois residents who can easily purchase smokes or gas in Missouri — such as the many St. Clair and Madison County residents who work in downtown St. Louis — already do so. The current tax difference on cigarettes is large enough to distort economic decisions. If the Illinois legislature increases it by another $1, the marginal changes might not be as large as one would expect, but they will certainly exist, and to Missouri’s benefit.

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