Dayton: Higher tobacco tax is about health, not revenue

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DFL Gov. Mark Dayton says the income tax increase on top earners in his revised budget plan is all about fairness.

But his proposal to raise the current tobacco tax of $1.23 per pack by an additional 94 cents will disproportionately hit Minnesotans of modest means, Dayton acknowledges.

At Maplewood Tobacco in Minneapolis, Travis Perez, 23, has just bought a pack of Newport 100s for $5.83. Perez is not a fan of proposals to make cigarettes more expensive.

"It's a bad idea. I hate paying almost $6, let alone going to pay seven or eight," Perez said.

Bright neon-green cards are piled on the counter near the cash register urging Perez and other customers to speak out against proposals to raise cigarette taxes in Minnesota by between 94 cents and $1.60 per pack.

If the tax is raised, Perez is pretty sure he and most other smokers will end up paying it.

"Yeah, I don't think people are going to quit smoking," Perez said. "I mean, everyone's been smoking for years. I'm not going to quit, regardless."

Deb Evans, 44, from Little Canada, is also upset about the prospect of paying more for cigarettes. "I'm not happy. It's already taxed to the max," Evans said.

She's trying to quit but she's addicted, and it's unfair to force smokers to pay more, Evans said. "Richer people than I am often don't smoke and they can afford gym memberships, and they can do all kinds of things," Evans said. "We can't. That's the bottom line."

Dayton buys that argument. Until recently he had opposed increasing tobacco taxes. But health benefits outweigh the burden on poor people, he said.

"I believe we want to make taxes fairer not more regressive but it serves other purposes," Dayton said.

"Yeah, I don't think people are going to quit smoking... I mean, everyone's been smoking for years. I'm not going to quit, regardless."

Under the governor's proposal, increasing cigarette taxes by 94 cents per pack raising an additional $365 million for the state budget over two years.

The increase is not about money, but instead about decreasing tobacco use, especially among young people, said Dr. Edward Ehlinger, state health commissioner.

"Other than totally banning tobacco as a product in the United States, the most effective way of decreasing use is by raising the price," Ehlinger said.

In 2009, US smokers were hit with a federal tobacco tax increase of 62 cents per pack. That came on top of Minnesota's health impact fee of 75 cents per pack, which started in the summer of 2005. Based on fallout from the previous tax hikes, Ehlinger estimates that if Dayton's proposed increase becomes law, 25,000 young people will opt not to start smoking and that about 2 percent of adult smokers will quit.

Ehlinger said the real budget impact of making cigarettes more expensive will come years down the road in the form of lower health care costs.

"We want people to start quitting and we also want to keep people from starting to smoke," Ehlinger said. "The impact of this on the health of the state will have a huge economic benefit that far outweighs the income that we're going to get from the taxes."

David Sutton, a spokesman for Phillip Morris' parent company, Altria, said Minnesota smokers already pay more than their fair share of taxes. He said dramatic increases could put cigarette tax collections in jeopardy.

"When large increases like Minnesota's that's being proposed comes into effect, it comes with a whole host of problems," Sutton said.

Not the least of which, he said, could be the smuggling of less expensive cigarettes into Minnesota from neighboring states.

"And a lot of times this is organized crime, and sometimes it's crime syndicates and other times its even more significant types of terrorist-related crime," Sutton said.

A spokeswoman for the governor said Dayton believes making cigarettes more expensive will reduce smoking without increasing crime.

Cigarettes in Minnesota currently cost much less than in Wisconsin. Dayton's proposal would push up the price of a pack to a penny more than the Badger state. Cigarettes would cost significantly less than in the Dakotas and Iowa.