ST. PAUL, Minn. - A legislative committee Thursday took up two bills that would raise taxes on tobacco products.
One of measures would substantially raise the price of cigarettes, to serve the dual role of encouraging smokers to drop the habit and filling the state's projected budget gap.
"In my mind, the public health goal of getting people to not start smoking, or to quit smoking, trumps any sort of revenue issues that are going on," Rep. Ann Lenczewski told KARE.
The Bloomington Democrat wants to raise the state cigarette tax by $1.60 per pack. Added to the current tobacco tax of $1.23, the new total would be $2.93, and boost the average price of a pack from $5.75 to $7.35.
The tax would put Minnesota's rate higher than neighboring Wisconsin, which currently tacks $2.52 to a price of each pack of cigarettes. Lenczewski's plan is substantially higher than Gov. Mark Dayton's proposed 94-cent per pack increase.
House staff researchers estimate that the $1.60 version would raise $440 million in each biennium, which is how lawmakers calculate revenue due to the state's two-year budget cycles.
"The state's healthcare costs related to smoking are $3 billion dollars every two years, so even if this tax is raising $400 million during that time, it's not even beginning to cover the true cost," Lenczewski explained.
"And so all the rest of us in Minnesota are paying higher taxes than we would need to because of cigarettes."
The House Tax Committee took testimony on Lenczewski's bill Thursday at a hearing that drew medical professionals and lobbyists on both sides of the issue.
Among the witnesses in favor of the legislation was Kaila Narum, an Andover woman who was 14 years old when she lost her father to esophageal cancer. He was diagnosed at age 39.
"Dad was getting more and more sick from the chemo, but he still was at every sporting event and the best dad he could be," Narum recalled.
"One day he was feeling sick and went to the hospital. The next thing I remember he was in the ICU in a coma, and I'm being told there's nothing left the doctors can do."
Narum said the experience of seeing her father, a smoker, die at age 40 led her to volunteer for the American Cancer Society Action Network.
"He wasn't there when I graduated from high school. He wasn't there to intimidate my first boyfriend, and I won't get a father-daughter dance at my wedding."
One of those who testified against the cigarette tax hike was Kim Crockett of the Center for the American Experiment, a conservative think tank based in Minneapolis.
"This would essentially prohibit smoking by price, making smoking defacto illegal," Crockett told lawmakers.
"We already learned the hard way with the de jure prohibition against alcohol that free people will find a way to consume prohibited products."
Crockett, a former smoker herself, said her father died from the effects of smoking too.
"Quitting as an adult was the hardest and best thing I have ever done, but I must note that we are a free people who must make choices. And we must live with the consequences of those choices."
Crockett and other witnesses pointed out that many states have overestimated how much revenue the incremental increase in tobacco taxes will generate. They suggest the Minnesota will face budget shortfalls if lawmakers bank on those staff projections.
Opponents also contend that retailers in border cities would lose business to competitors in states with more favorable cigarette taxes. Currently Iowa, South Dakota and Wisconsin all have higher rates and Minnesota, while North Dakota -- at 44-cents -- is considerably lower.
"Adult smokers will find the best prices," Ken Garcia, a spokesperson for Phillip Morris Tobacco, told KARE.
"If you're going to continue raising the price of the cigarettes, they're going to go across the border, they're going to go to a native reservation, or they're going to try to buy them online. And that's going to harm the retailers in Minnesota."
Garcia does agree with another tobacco tax bill that went before the same committee Thursday. The measure, sponsored by Rep. Jennifer Loon, would even the playing field between cigarettes and mini-cigars, also known as cigarillos.
"Ultimately they look like cigarettes, they're marketed like cigarettes in packs of 20," Garcia said,
"So that's money Minnesota is leaving on the table."
Anti-tobacco advocates say mini-cigars cost significantly less than cigarettes because they're taxed as "other tobacco products" which carries a much lower rate. That makes them especially attractive to young smokers, who as a group are very sensitive to prices.
The tax panel took no final votes on the two bills. Both Lenczewski's cigarette tax hike and Loon's mini-cigar measure were laid over for future discussion and action.
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