Tough Road For Health-Related Tax Code Changes
Public health advocates are cheering proposed changes to the state tax code that would encourage healthy behaviors. But Gov. Sam Brownback and the legislators who pitched them face challenges in getting them passed.
As part of a larger effort to fill a gaping budget hole, Brownback called for increasing taxes on tobacco and alcohol. The tobacco tax in particular has gathered support from the state’s health community.
But the pushback from industry and business groups — including convenience and retail liquor stores — has been swift, and legislative leaders who campaigned on their conservative credentials have objected to the tax increases.
Meanwhile, two legislators have introduced a bill to exempt fresh fruit and vegetables from the state sales tax, but that proposal is likely to run into the opposite problem: The state desperately needs the tax money.
“We’re not under any illusions it will be easy,” said Sen. Michael O’Donnell, a Republican from Wichita.
O’Donnell introduced the produce tax exemption with Sen. Oletha Faust-Goudeau, a Democrat from Wichita, as a beacon of bipartisanship. He said the timing might be right in that the budget crisis will force legislators to delve into the state tax code and crack the door for his bill.
It’s projected to cost the state about $43 million in tax revenue each year, but Faust-Goudeau said in the long term it actually could save the state more in health care costs if it encourages Kansans to eat healthier.
Weight problems are a significant factor in the state’s health care costs.
A report released last year by the Kansas Department of Health and Environment found that as of 2011, 64.4 percent of Kansas adults were overweight, including almost 30 percent classified as obese.
In 2000, only about 21 percent of Kansas adults were obese.
A survey released in 2010 by the federal Centers for Disease Control and Prevention found that less than 25 percent of Kansans reported eating the recommended five combined servings of fruits and vegetables per day.
Lawrence Gostin, a Georgetown University professor who has studied how changes to the tax code can encourage or deter healthy behaviors, said he had not heard of any other state exempting only fruits and vegetables from its sales tax. But Gostin said he thinks it’s “an excellent idea.”
“Why should states tax healthy behavior, such as eating fruits and vegetables?” he asked. “Government encourages the population to eat healthily, so it shouldn’t tax individuals who comply with these health recommendations.”
Most states exempt all groceries from sales tax. Kansas is one of 14 states that include groceries in their sales tax and, at 6.15 percent, the Kansas tax on food is second highest in the nation, trailing only Mississippi at 7 percent.
Add in sales taxes levied by local governments, and Kansans in many cities and counties pay almost $10 in tax on every $100 grocery bill.
The last time the Kansas Legislature examined the sales tax on food, in 2013, a plan to lower taxes on all groceries to 4.95 percent passed the Senate but faltered in the House.
Sen. Jeff Melcher, a Republican from Leawood, eventually voted for the tax reduction but expressed some concern that it would exacerbate the obesity problem by encouraging people to buy and eat more food.
Gostin said there’s no evidence that’s the case in states with no grocery sales tax.
“But if government subsidizes unhealthy foods such as through corn subsidies, it makes unhealthy foods more affordable and attractive,” he said.
Gostin said that might be one shortcoming of the proposed fruits and vegetables tax exemption: If processed foods remain cheaper even with sales tax included, then the exemption primarily will benefit middle- and upper-class Kansans who already buy more fruits and vegetables.
Increasing the tobacco tax is more likely to benefit overall public health, he said.
Gostin called tobacco taxes “the single most important strategy for reducing smoking, especially among young people.”
He said there is “something psychological” about a tax increase that makes it even more effective in deterring behavior than a tax exemption is at encouraging that behavior.
Bipartisan opposition to tobacco tax
Lobbying groups representing the state’s doctors, dentists and hospitals all lined up to support Brownback’s proposed tobacco tax in a hearing last week. So did Roy Jensen, the director of the University of Kansas Cancer Center, and public health groups like the American Lung Association and the Kansas Health Foundation.
Jeffrey Willett, the foundation’s vice president for programs, said the proposed $1.50 per pack cigarette tax increase is projected to reduce youth smoking in Kansas by 20 percent and encourage about 25,000 Kansas adults to quit.
That would make a dent in the state’s estimated $1 billion a year in tobacco-related health care costs, Willett said, and keep Kansas from sliding further in its efforts to curb smoking.
“In 1991, Kansas had the eighth-lowest adult smoking rate in the nation,” Willett said. “Today, we have dropped all the way to 31st. We believe Kansas can do better.”
Business interests led by the powerful Kansas Chamber of Commerce lined up in opposition to the bill, saying it would only increase cigarette smuggling and black market sales or drive cigarette buyers across the state line to places like Missouri, which has one of the nation’s lowest tobacco taxes.
The Kansas Chamber, in written testimony from CEO Mike O’Neal, declined to address the possible public health benefits.
“Taxing cigarettes and alcohol may be a way to socially engineer behavior, but that is not the expressed intent of this bill,” O’Neal said. “A $107 million price tag has been affixed to this proposal to help plug a hole in the a budget that can be plugged with reductions in spending.”
In the end, there may be bipartisan support for killing the proposed cigarette tax increase.
Republican leaders who, like O’Neal, prefer spending cuts as a budget fix already have voiced opposition. And Democrats who have railed against the income tax cuts that preceded the budget crisis have said they’re loath to use tobacco taxes to fill the hole because they fall disproportionately on poor Kansans — a shortcoming Gostin outlined in a paper published in the journal Promoting Health: Intervention Strategies from Social and Behavioral Research.
Gostin wrote that the cigarette tax, while effective in promoting public health, is “burdensome” on smokers with lower incomes.
“It may compel individuals to pay a ‘health tax’ on a behavior that is addictive and, to a certain extent, beyond the person’s control,” he wrote. “More importantly, the tax is highly regressive because most adults who smoke are in lower socioeconomic classes.”
Editor’s Note: The Kansas Health Foundation is the primary funder of the Kansas Health Institute, which is the parent organization of the editorially independent KHI News Service.
Andy Marso is a reporter for KHI News Service in Topeka, a partner in the Heartland Health Monitor team.