116 3rd St SE
Cedar Rapids, Iowa 52401
Let he who is without adequate revenue cast the first sin tax.
I’m pretty sure that’s in the Bible. Maybe not in the Scriptures themselves but definitely in the fiscal notes at the end.
One hundred years ago -- April 11, 1921 -- Iowa Gov. Nathan Kendall signed a bill into law that permitted the lawful sale of cigarettes in Iowa along with a 2-cent per pack tax. According to the Iowa Department of Revenue, it was the nation’s first cigarette tax and the first major tax collected by the state of Iowa. You may have noticed others have cropped up since.
Although rather than using a tax to discourage sin, Kendall really was legalizing sin already in widespread progress. And if the state could pick up some loose change from puffers, so much the better.
Earlier the same week, the bill had been defeated in the Iowa Senate. The wind swiftly changed direction, to the consternation of the Women’s Christian Temperance League, which thought it killed the measure.
In the Cedar Rapids Evening Gazette of April 12, Kendall explained his decision.
Public sentiment, he said, was against enforcement of the current law. The state, he said, “is confronted not by an attractive theory but by a practical condition.” That being the folly of prohibitions. And nicotine addiction.
The bill provided “drastic penalties” for anyone caught selling cigarettes to minors, who would be forced to rat on the seller. It allowed local governments to license, or not license, cigarette retailers and collect fees. And the state would collect annual taxes on sales adding up to “several hundred thousand dollars.”
“In the disordered state of fiscal affairs at this juncture, with the burdens of government increased and the ability to bear them reduced so material a contribution to the treasury would be especially welcome,” Kendall said.
Besides, people were going to smoke anyway.
“The original statute was sufficiently rigorous to banish the cigaret utterly but the majority sentiment of the people was averse to its observance,” said Kendall, a Republican lawyer from Albia who served in the Iowa House, including as its speaker, and in the U.S. House.
His tax decision must be why our current crop of Republicans don’t gather for a Kendall Day Dinner.
Elsewhere on the same page were headlines about a war on illegal liquor in Audubon County, so not all the tough prohibition lessons had been learned just yet.
The new tax took effect on July 4, 1921, no doubt allowing many an Iowan to light fireworks with a legal cigarette. Iowa brought in a tidy $590,919 in cigarette taxes in 1921-1922, according to Legislative Service Agency records.
Revenues rose steadily in subsequent years. By 1931, the 2-cent tax raised $1.4 million. The rate stayed at 2 cents until 1953 when it was increased by a penny. In 1954 collections topped $7 million.
Through the last half of the 20th century, the cigarette tax was raised seven times and a tax on other tobacco products was added in 1968. The cigarette tax increased to 36 cents in 1991 and in fiscal 1992 it brought in more than $93 million.
When I was still covering the Statehouse in 2007, a Democratically-controlled Legislature approved a $1 increase in the tobacco tax, boosting it to $1.36 per-pack.
Democrats argued the increase was a public health measure intended to persuade people to stop smoking and keep young Iowans from starting. Republicans who opposed the increase argued it was a money grab for more spending. Democrats countered the money would be spent on health care.
I reported at the time that 18 percent of Iowa adults smoked, a figure that now stands at 16.4 percent according to the Campaign for Tobacco-Free Kids.
Tobacco taxes now flow into the Iowa Health Care Trust Fund. Of the $208 million expected to be collected this budget year, more than $182 million will go toward paying for the state’s Medicaid insurance program, or more accurately to the private corporations Terry Branstad and Kim Reynolds hired to manage it.
Iowa’s current cigarette tax ranks 32nd nationally. The highest is in the District of Columbia at $4.50 per pack. The lowest is Missouri at 17 cents.
Sin continues to be very taxable. Taxes on wagering at Iowa casinos finance tens of millions of dollars of infrastructure projects annually. The beer tax in Iowa raises roughly $13.5 million annually.
In 2006, then-Gov. Tom Vilsack proposed a 10 percent increase in Iowa’s per-gallon beer tax. Rarely has a governor’s proposal been rejected so soundly and so quickly. Takes longer to quaff a pint.
So go out today and buy a pack of smokes. Not to puff, of course, but to commemorate Gov. Kendall’s key role in taxation history and prohibition rejection. Also, that $1.36 could really help with “the disordered state of fiscal affairs at this juncture.”
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