JEFFERSON CITY, Mo — On tax filing day this year, the state of Missouri missed out on more than $73 million in master settlement agreement payments, owed by major tobacco companies.
The loophole was the product of an unintended consequence, brought forth in 1998 following the Master Settlement Agreement signed by big tobacco companies at the time. The agreement, which only pertained to the major tobacco producers at the time, provided that these companies make escrow deposits from tobacco sales to the states to be used for public health programs. Because of the MSA’s language, companies producing cigarettes today that did not exist or where significantly smaller in 1998 do not have to make such payments, which major companies say gives the smaller cigarette company an unfair competitive advantage.
“Our position is the allocable share amendment should be passed to level the playing field, Missouri obviously has substantial funds at risk if they do nothing to resolve the issue,” said Bryan Hatchell, spokesman for Reynolds American Inc., a parent company of R.J. Reynolds Tobacco Co. “I can tell you, that we believe the state of Missouri still has time to resolve this issue, and the legislature needs to act on this issue in the next two weeks. If there is an active will they can get it done.”
Currently there are two bills in different stages of the legislative process, that would “level the playing field” among different tobacco companies in the state of Missouri.
Senate Bill 820, sponsored by Sen. Kurt Schaefer, R-Columbia, which passed the appropriations committee in a 7-3 vote, has yet to reach the official senate calendar. In essence SB820 requires all tobacco companies to either participate in the terms of the MSA or deposit just over a penny for every unit sold within the state.
It’s House counterpart, House Bill 1242 sponsored by Rep. Rick Stream, R-Kirkwood has not yet passed out of the House Budget Committee, but completed one hearing more than a month ago.
Fair Trade Missouri has gone on record projecting that the state of Missouri is in a position to lose $1 billion over the next ten years if the loophole is not fixed. They have also noted that Missouri is the only state in the country that has not yet fixed the MSA loophole.
A ballot initiative, Proposition B in 2012, was an effort to raise the sales tax on cigarettes in the state of Missouri. The proposition also included language involving escrow accounts, included in language on the Missouri Foundation for Health website.
“Proposition B changes requirements for the escrow fund that reimburses the state for smoking-related health expenses by increasing the amount generic brand tobacco manufacturers must pay to more closely match that of name brand manufacturers,” the website says.
The initiative failed to pass receiving 40,419 votes and lost by a margin of 1.6 points.
