Before Kansas chooses to increase the tax on a pack of cigarettes another dollar, state officials might want to look at what happened the last time it increased cigarette taxes substantially.
Beginning on July 1, 2015, at the start of the 2016 fiscal year, Kansas increased its cigarette excise tax by 50 cents per pack. This increased the average price for a pack from $5.67 to $6.27, nearly 11 percent. The presumed purpose of this increase was to generate revenue.
If so, the strategy may not have worked as planned, at least not in the long run. Sales of taxable cigarettes declined 7.1 percent in FY2016 compared to FY2015. Not surprisingly, the counties bordering Missouri took the biggest hits. For instance, tax-paid cigarette sales declined 12.1 percent in Wyandotte County and 14.1 percent in Johnson County. In Atchison County sales suffered the largest loss at 18.8 percent.
Declining sales is the norm in the industry. Nationwide total state tax-paid cigarette sales fell 1.5 percent in 2016. In Missouri, however, thanks in no small part to the Kansas tax increase, tax-paid sales in Missouri increased 2.4 percent in that same year, much of that increase coming along the border.
There is a reason why Quik-Trip has built so many stores in Missouri on or near the state line. At 17 cents a pack, Missouri has the lowest sales tax in the nation. North Carolina’s is more than twice as high. If Kansas raises its tax per pack to $2.29, it is hard to believe anyone but the most desperate smokers within an hour of the border would buy their cigarettes in Kansas.
Nationwide, cigarette sales account for close to 1/3 of the total sales volume of a convenience store. It would be problem enough for Kansas store owners to lose this revenue, but Kansans who cross into Missouri to buy cigarettes will likely make their other convenience store purchases as well, most notably gasoline, which is also taxed less in Missouri.
Then too there are the sales of Slim Jim’s, donuts, condoms, anti-freeze, and Slurpees to consider, not to mention drug-fueled late night runs for ice cream and chocolate syrup.
No, there has to be a better way to balance the Kansas budget. How about cutting spending?