Proposition B could impact higher education

This November, citizens have the opportunity to vote  for a bill that will impact higher education throughout the state.

Proposition B is a ballot measure regarding the tax for tobacco, according to the Secretary of State’s website. This proposition imposes an additional 73-cent tax increase on each package of 20 cigarettes.

If passed, Proposition B will create the Health and Education Trust Fund by using the tax money generated from $0.0365 per cigarette tax, 25 percent of the manufacturer’s demand price for roll-your-own tobacco, and 15 percent for all other tobacco products. The proceeds would go to elementary, secondary, college and university public school programs to reduce and prevent tobacco use.

The measure would increase the amount certain tobacco product manufacturers must maintain in their escrow accounts to pay judgments or settlements, before any funds in escrow can be refunded to the tobacco product manufacturer and create bonding requirements for these manufacturers.

Revenue for state government is anticipated to be $283 million to $423 million annually. Funding only will go toward what is permissible by the proposal.

University President Troy Paino said Proposition B would generate about $300 million in additional revenue and higher education would receive about 30 percent of that amount. Truman could expect to receive $4 to $5 million of additional state appropriation, he said.

“This would not completely fill the hole that was left by the budget cuts of the last three years, but it would go a long way in getting back to the budget Truman had in 2008,” Paino said.

He said if the University receives more cuts, these additional revenues would help soften the blow of any additional cuts.

Paino said this proposition could provide more resources to Truman.

“We’ve been cut significantly over the last several years, and that put a strain on what we do here,” he said. “We’ve been cut almost 13 percent in our state appropriation since 2010.”

Paino said the University’s state appropriations have been cut almost 13 percent during the last three years and the budget cuts have put a strain on the University in a variety of ways.

Budget cuts make it hard for the University to provide support for the faculty, he said, and the work they do in and out of the classroom with students. It also has put a strain on other student services that Truman provides, including the athletic budget,  academic budget, and the maintenance and facilities budget, Paino said.

“Any hope of additional revenue at this point in time could go some way in relieving that stress,” he said.

Compared to the rest of the state, Midwest and the nation, Paino said he thinks Truman employees are underpaid.

“In order to be competitive and attract the best and brightest faculty and staff to Truman, we have to be more competitive, and without any additional resources and nothing but budget cuts it’s difficult to make the math work,” he said.

Paino said Proposition B gives Truman hope that there could be an infusion of resources that could help meet some of the University’s needs.

During the long term, he said the hope is the proposition might help reduce the cost of Truman’s health insurance premiums.

“We need to look at long term strategies to how we can reduce that cost, and I think that’s another advantage of Proposition B,” Paino said. “It’s going to be creating certain incentives and disincentives around the habit of smoking that could help us on our health care cost down the road.”

Stephen Smith, business law and economics professor said the tax increase would displease members of the tobacco industry.

“It may not hurt [the tobacco industry] a lot because its demand is mostly an addictive demand, but if the tobacco industry would not be pleased by the tax they probably would fight it if they could,” Smith said.

He said the benefit of Proposition B is the revenue increase for higher education. The other benefit is the tax will raise the price of the product and probably will reduce the consumption of tobacco. He said tobacco demand is not sensitive to price changes.

“If something is in inelastic demand, you can raise the price a lot and the number of buyers will drop, but not much,” Smith said.

With taxes you always have to think of the alternative to raise revenue, Smith said. Most other taxes would have more harmful effects on industries considered good industries, whereas tobacco is one that could afford to be harmfully affected, he said.

Smith said one negative factor for the proposition is this tax is regressive.

“A regressive tax means a tax that disproportionately burdens lower income people compared to middle class, and middle class people compared to wealthy people,” Smith said.

Economics professor David Gillette said the purpose of Proposition B is to convince tobacco consumers to smoke fewer cigarettes by raising tax prices.

These means have been successful in other states, Gillette said.

“People will find a substitute for smoking cigarettes, such as thin cigars that are like cigarettes but are not taxed at the same rate,” Gillette said.

“If we keep everything else constant then any additional revenues we get are going to be more money for tax profiteers.”

Gillette said the impact of Proposition B will not be on the tobacco industry but on the form in which the tobacco is consumed.

“Whenever you change a rule, you’re going to influence behavior,” Gillette said. “If consumers want to purchase tobacco products, the proposition will only change their consumption.”