Craig Gebhardt, who smokes two packs of cigarettes a day, will have to start handing over an extra $3.20 daily starting Monday. That’s when a raft of new state laws take effect, including a $2.1 billion tax increase that will raise the cost of cigarettes and impose the first significant income tax increase on the state’s wealthy in decades.
“I either quit or spend more money,” Gebhardt said matter-of-factly. Unwilling to give up his cigarettes, Gebhardt said he’ll just have to “work a little harder to afford them.”
The new revenue will go toward balancing the state’s budget, repaying K-12 schools and helping fuel an array of new spending that ranges from roads and light-rail construction to a college tuition freeze and property tax relief.
Consumers will feel a little pinch too. The state sales tax is being extended to digital items including downloaded ringtones, music and videos and online gaming. One break: Digital textbooks will have the same exemption given to traditional textbooks.
The new fourth-tier income tax rate of 9.85 percent will be levied on adjusted gross income above $250,000 for married couples and $150,000 for single filers.
Jobs, Energy, Housing
Some of the money raised will go to create new job opportunities and improve housing. Funds are being set aside for job training a new office to market state goods overseas and a tax cut for business. Other laws include:
• Tax breaks and financial incentives for television and film producers who do location shoots in Minnesota.
• $10 million for housing in areas with low-vacancy rates.
• A new solar energy requirement for Minnesota’s largest utilities that mandates 1.5 percent of their energy come from solar sources by 2020 and a non-mandatory goal of 10 percent by 2030.
• Employers with at least 50 workers must include autism disorder treatment and the state will pay to provide the same benefit to children on Medical Assistance.
• Nursing homes will get a 5 percent funding increase, giving employees their first raise in four years.
• The state health department will hire a director of child sex trafficking prevention, who will coordinate efforts to treat underage prostitutes as victims rather than criminal offenders.
• The cigarette tax will rise to $2.83, an increase of $1.60 a pack, giving Minnesota the sixth-highest cigarette tax in the country. “Little cigars” and moist snuff products also will be taxed at the new rate. Part of the revenue from the first year’s increase will help fund the new Minnesota Vikings football stadium.
The cigarette changes are driving Tara Kolden, 34, to make this the last weekend for her and her fiancé to smoke. “We’re getting married next summer, and I’d rather spend the money getting my wedding planned out than buying cigarettes,” she said.
Health advocates say that’s just the effect they’re hoping the higher tax will provoke. “Oftentimes it comes down to ‘I can’t afford this anymore,’” said Mike Sheldon, of ClearWay Minnesota, an anti-tobacco nonprofit.