A Senate bill that proposes to raise the state tobacco tax could bring an additional $800 million to Mississippi each year, a potential windfall in a state with an annual budget of just over $6 billion.
But what’s most remarkable about this bill isn’t its unprecedented bottom line but the powerful Republicans who are quietly backing it — namely Gov. Phil Bryant.
The governor has not publicly expressed support for this bill, which would increase the cigarette tax by $1.50 a pack. But in private Bryant has told several people who spoke to Mississippi Today on the condition of anonymity that if a tobacco tax were to land on his desk, he would sign it. These sources were not authorized by their offices to speak to the press on the governor’s behalf.
“Gov. Bryant is supportive of generating new revenue and stopping smoking and other unhealthy behavior,” Clay Chandler, director of communications for the governor’s office, told Mississippi Today. “He will carefully review any bill raising taxes on cigarettes should one reach his desk.”
Bryant has not signed a tax increase since he took office six years ago, so his backing would be considered a significant milestone in the bill’s journey to becoming law. His support would give the bill a level of viability most proposed taxes in this state don’t have, say those pushing for a cigarette tax increase.
“Its unexpected momentum (for the bill), and we’ll take it,” Katherine Bryant of the American Heart Association said when told of the governor’s support.
But Bryant’s support is far from a guarantee that this bill will make it to law. One reason he hasn’t signed a new tax since taking office is that one has yet to make it to his desk. And while several prominent Senate Republicans have expressed support for a cigarette tax, the Senate’s leader, Lt. Gov. Tate Reeves, is holding to his pledge of no new taxes.
“He’s never supported raising taxes on anybody, and I don’t see that changing any time soon,” said Laura Hipp, a spokesperson for the lieutenant governor.
This doesn’t mean the bill is dead, but it does face an uphill battle in making it to the House. Senate Bill 2701 is currently double-referred to the Senate Finance and Medicaid committees, a tactic commonly used to kill legislation. The deadline for this bill to make it out of the Finance committee is Feb. 21.
In this case, however, both committee chairmen have expressed support for the bill. Sen. Brice Wiggins, R-Pascagoula, the bill’s sponsor, has argued that a tobacco tax is actually strong conservative policy because health problems related to smoking are a financial drain on the state, particularly the Division of Medicaid. This bill promises to both financially offset much of those expenses and deter people from smoking.
“Taxes are not — and rightfully so — not a favored thing within the Republican majority or pretty much anybody in general,” said Wiggins. “But we have a significant health problem in this state, and there are things we can control and costs we can bring down. And this is the fastest way to do it.”
In 2016, annual health care costs related to smoking topped $1.23 billion in Mississippi. Much of that was absorbed by the state’s Division of Medicaid, which provides health care to nearly a quarter of the state. Although the agency does not keep numbers on the direct impact of smoking on its budget, the amount likely reaches hundreds of millions of dollars. In 2013, costs related to second-hand smoke alone topped $36 million.
What’s unique about Wiggins’ bill is that it’s one of the first in the country to directly tackle the relationship between smoking and Medicaid costs. The current cigarette tax in Mississippi is 68 cents per pack, the 12th lowest in the country. The new bill would raise that to $2.18 cents a pack and then divert all of the new tax revenue — approximately $200 million a year — into a special fund called the “Medicaid Program Tobacco Cessation Fund.”
The money in the fund would first be used to fill any deficit Medicaid may have, a number that has averaged $45 million a year over the last four years. Remaining dollars would go towards a tobacco cessation program.
Every dollar that goes towards Medicaid is technically eligible for federal matching dollars. In Mississippi, which has the highest federal match in the country, every dollar spent on Medicaid is matched with three federal dollars. This means $200 million in state funds could suddenly become $800 million for an agency whose public struggles to cover costs are often among the most hotly contested issues of the legislative session.
“Whenever you want to decrease an activity, you raise the cost of doing that activity,” said Dr. Steve Demetropoulos, director of the Medical Care Advisory Committee, which advises the Mississippi Division of Medicaid on policy. “Putting a tax on tobacco — the people who are smoking are the highest utilizers of medical care — and by directing it back into Medicaid, the tax will pay for care that (patients) won’t be able to pay for themselves.
“Some of these folks may be healthy now, but what happens when they turn 50 and have a stroke? If they can’t work, guess what? They’ll be on Medicaid.”
The American Heart Association, the Mississippi State Medical Association, the American Lung Association and the state Department of Health and more than a dozen other state and national organizations have been lobbying hard for a $1.50 tax increase this session. On Thursday morning, these groups are scheduled to hold a press conference on the increase.
These groups have provided a trove of data showing how a $1.50 tax increase, specifically, can curb smoking statewide. Every 10 percent increase in cigarette price generates up to a five percent decrease in smoking. At an average price of $4.50 a pack, a $1.50 tax could cut the population of smokers in the state by 15 percent in the first year after it’s passed.
“It might not seem like a lot, but that’s an enormous financial impact to our state,” the Heart Association’s Katherine Bryant said.
The last time Mississippi increased the cigarette tax was 2009. The Legislature voted to boost the tax, which had been 18 cents a pack, by an additional 50 cents. Since then the number of packs sold in the state has fallen by more than a third. In the first year after the bill took effect, the number of packs sold dropped by nearly 20 percent, going from 263,000 packs a year to 207,000 in 2010.
Advocates of the tax have targeted $1.50 because they say it will have “maximum impact” on smoking cessation. During a press conference on a potential cigarette tax in November, Dr. Mary Currier, the state health officer, said increasing the tax on a pack of cigarettes by less than a dollar “doesn’t have much impact.”
But this amount is also a potential sticking point, even for Republicans who support the idea of an increased statewide tax on tobacco. According to those who spoke directly with them, the governor is in favor of a tax but hasn’t committed to a $1.50 increase.
Senate Finance Committee Chairman Joey Fillingane, R-Sumrall, said he’s also concerned that a $1.50 increase, which would give the state the 14th highest tobacco tax in the country, is unrealistic.
“Those who say ‘don’t even do it at all if you can’t do $1.50’ are missing the point,” Fillingane said. “We have to get a certain number of votes to get this bill passed. That means dealing with what’s possible, not only what the ideal may be.”
Still, Fillingane said he’s hopeful the bill passes.
“Generally we’re not for tax increases in the state Senate, but I think you can certainly make a strong public policy argument that the higher the cost of tobacco products, the less likely young people are to start smoking, and the people who already are may find it cost-prohibitive to continue,” Fillingane said.
But any tax, even a Republican friendly one, is still a tax and a tough sell at the Mississippi Capitol. Every year a handful of tobacco taxes die without even being brought up in committee.
Other use taxes have similarly stalled. An increase in the gasoline tax has been hotly debated in several sessions, but the Legislature hasn’t actually voted to increase the tax since the 1980s. The Legislature last voted to increase the sales tax back in 1991.
As a result, while a potential $800 million bottom line may be the most eye-catching part of this bill, both Wiggins and Fillingane are quick to veer away from talk about revenue to focus on the bill as, primarily, a way of improving the health of Mississippians.
“A gasoline tax would probably be driven by revenue for a specific project. The tobacco tax is a different animal because you can make a strong argument that increasing this tax gives you better health outcomes for the entire state,” Fillingane said.
The projected health benefits of $1.50 tax increase are astonishing. According to data from the American Heart Association, after one year, the tax would have reduced youth smoking by 16.8 percent. During that same time period, an additional 26,500 adult smokers are projected to give up the habit.
“This is our one chance to really improve health outcomes in Mississippi, almost overnight. You’re not going to change peoples nutrition overnight. You’re not going to change sedentary lifestyles,” Demetropolous said. “But this is one of those things where you can just flip a switch.”
Still, even health care ultimately comes down to economics, and some advocates of the bill said that the strongest, and perhaps most conservative, argument for a tax lies in what a healthy population would mean for Mississippi’s economy.
At 23 percent, Mississippi’s rate of smoking among adults is currently the fourth highest in the country. The national average hovers just over 15 percent. Mississippi also has a notoriously unhealthy population, often ranking dead last in many national health indices. According to Demetropolous, these two factors are “absolutely linked,” and as he points out an unhealthy population is one that can’t work.
Wiggins said he agrees.
“The healthier our workforce, the more jobs (Mississippi) can attract that are higher paying, that have insurance,” Wiggins said. “If you’re looking for the A-1 fix when you’re trying to increase jobs, its a healthy workforce. And this goes hand-in-hand with that,” Wiggins said.
Among Mississippians the idea of a cigarette tax is relatively popular. According to a 2017 study conducted by Mississippi State University, 72 percent of adults in the state would support increasing the cigarette tax, the most popular proposed tax increase in the state, next to alcohol.
But Fillingane acknowledges that whether the governor gets a chance to sign legislation increasing the cigarette tax will likely depend on Tate Reeves.
“If we do choose to look at it, it will definitely be from the perspective of improving health outcomes and not for generating dollars for a program,” Fillingane said. “Of course, the lieutenant governor sets the health policy for the state, so we’ll be working closely with him on this.”