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“Tobacco users get tax break from Legislature,” reads the headline in today’s StarTribune. The tax break in question involves the cigarette tax. In 2013, the legislature and governor approved three years of annual increases in the tax, with an inflation adjustment built in to maintain the real value of the tax. The tax bill includes a provision to eliminate the inflation adjustment.
The policy goal of the tax increase is clear: reduce smoking, especially among those who are sensitive to changes in the price of cigarettes. Young people are especially price sensitive, so increasing cigarette tax can keep many Minnesotans from smoking in the first place.
There’s no mention of this goal on the part of the House Republicans. Instead, they advance two reasons for eliminating the inflation adjustment. First, I’ll hand the microphone over to House Speaker Kurt Daudt: “This is the most regressive tax you could put on Minnesotans. It affects the poorest Minnesotans the most.”
Sorry, but I don’t buy this argument. If the legislature wants to help low-income Minnesotans, there are far better ways to do it than to keep the cigarette tax low. Expanded child care funding, an increase in the earned-income tax credit, and universal pre-K education come to mind.
Second, here is Rep. Greg Davids: “My convenience stores are getting killed.” Ah, now we’re getting somewhere. Eliminating the inflation adjustment is about helping out a particular industry, in this case gas stations and convenience stores that sell cigarettes. From the StarTribune:
Lance Klatt, executive director of the Minnesota Service Station and Convenience Store Association, said the yearly tax increase has been a burden on store owners, particularly along the state’s borders. They don’t just lose out on tobacco sales, Klatt said — customers who normally stopped in to pick up cigarettes would often also buy gas, food or other products.
“This is not about tobacco; this is about Minnesota retailers,” Klatt said.
Here is the trade-off laid bare: help out convenience stores at the cost of more smoking among Minnesotans.
It’s not a good trade-off and is yet another reason why Governor Dayton should veto the tax bill.