Got money to burn? Bill would double Minn. cigarette tax

Minnesota legislators rekindled the debate over tobacco taxes on Thursday as a House committee considered a proposal to vastly increase the cost of cigarettes.

The proposal, from House Taxes Committee Chairwoman Ann Lenczewski, would more than double the current cigarette tax and give Minnesota one of the highest tax rates in the country. Her bill would vault Minnesota ahead of Wisconsin in cigarette taxes and would push the tax beyond the 94-cents-per-pack increase Gov. Mark Dayton proposed last month.

The two cigarette tax proposals make it clear that, with increasing concerns about the health risks of smoking and the state's need for more revenue, legislators will be forced to focus on whether they want to make cigarettes more expensive.

"I think it is going to be a serious part of the discussion," said House Speaker Paul Thissen, DFL-Minneapolis. He would not predict the final outcome of those discussions. The committee did not take a vote.

State officials estimate that if Lenczewski's proposal to increase the tax by $1.60 to $2.83 became law, sales would drop by about 65 million packs. But, assuming sales of 162 million packs, the higher tax would still increase Minnesota's tobacco tax haul by more than $440 million over the next two years. Dayton's proposal would garner about $370 million over the next two years.

Minnesota last saw a tobacco tax increase eight years ago, when Republican Gov. Tim Pawlenty proposed a new "health impact fee" to raise revenue, increasing the cost of cigarettes by 75 cents. That set the tax at $1.23 a pack, about average for the nation but below all Minnesota's neighboring states but North Dakota.

Lenczewski, DFL-Bloomington, said average is not good enough. She said she had wanted to propose jumping the tax even higher than the $1.60 increase she brought to committee Thursday but was persuaded not to do so because it would punish people who could not quit.

The higher cost of cigarettes would mean fewer people will become smokers, they said, and more people would quit, potentially saving lives and the state billions in health costs.

"The choice is clear: Protect kids or tobacco industry profits," said Molly Moilanen, director of anti-tobacco ClearWay Minnesota.

"This bill will ensure that I will deliver less bad news to my patients," said Dr. Courtney Jordan Baechler, a cardiologist and vice president of the Penny George Institute for Health and Healing.

Opponents countered that raising the cigarette tax would create a smugglers' black market, inordinately harm poorer citizens and drive mom-and-pop stores that rely on cigarette revenue out of business.

"This is a huge increase and it will cause more problems than you probably can imagine," said Monte Williams, who represents Altria, Phillip Morris USA's parent company.

Minnesota's tobacco tax revenue has actually decreased slightly each year since 2006, when the 75-cents-per-pack fee was added. That year, the state brought in $417 million from cigarettes. In 2012, it was $371 million.