Where Health Groups Oppose a Cigarette Tax Increase, Big Tobacco Champions It

On November 2, 2016, NPR published an article about Missouri's Constitutional Amendment 3 which calls for an increase in the state's cigarette tax. Three key interest groups have rallied support and opposition for the amendment. Big tobacco companies hope the cigarette tax will pass, and health groups and small tobacco firms want the electorate to vote against it.

The three interest groups' positions seem unusual, but upon deeper analysis, their position corresponds with their goals. Health groups, like the American Lung Association, argue that the proposed tax increase of $0.60 per pack is not high enough to deter smokers. On the other hand, big tobacco companies like R.J. Reynolds have spent millions to support Amendment 3 because it will harm their small tobacco competitors. As the result of a national settlement in the late '90s, big tobacco companies currently pay a special fee that their smaller competitors don't face. This fee allows smaller tobacco companies to undercut large tobacco companies' cigarette prices because they don't have to pay the fee. Small tobacco hopes to continue undercutting their prices which is why these companies have spent millions to oppose Amendment 3.


Olson would predict that the small tobacco companies and small health interest groups will successfully block Amendment 3's passage because they face less of a freerider problem than bigger groups like big tobacco companies. Although votes are still coming in, the results have been called at 2.7M votes to turn down the cigarette tax increase. It seems that Olson's hypothesis has proven correct in this case.