Legislative Notebook: Higher Cigarette Taxes On The Table In Minnesota

By Danielle Killey and Don Davis

Minnesota legislators are considering raising cigarette taxes and the cost of little cigars by classifying them cigarettes, which are taxed at a higher rate than cigars.

The House taxes committee took comments about the proposals, but did not vote on either issue Thursday. It plans to return to the matters.

“A majority of Minnesotans support increasing the tax on cigarettes by $1.50 per pack,” ClearWay Minnesota’s Molly Moilanen told the committee. “We stand ready to do whatever we can to help smokers quit and prevent our youth from smoking.”

The bill calls for a $1.60 increase. Gov. Mark Dayton suggests raising taxes 94 cents a pack.

The current tax is $1.23 per pack.

Anti-smoking groups say the higher taxes would prevent 47,700 Minnesota children from become smokers, help 36,600 adults quit and keep 27,700 from dying.

“The statistics are grim for those who fall into a tobacco addiction trap,” testified Dr. Courtney Jordan Baechler, a cardiologist and a volunteer with the American Heart Association. “But the most important thing we can do as adults, and you can do as lawmakers, is to make sure that tobacco products are as difficult as possible for kids to get their hands on.”

Dr. Thomas Kottke of Health Partners said increasing cigarette taxes is the most effective politically feasible way to slow smoking.

If nearby states have lower cigarette prices, it will hurt border areas, Rep. Greg Davids, R-Preston said. “For legislators who live in districts that border two states, such as I, this legislation is very problematic for businesses.”

The committee also is looking into defining “little cigars” as cigarettes, which would raise their costs. Little cigars are similar to cigarettes but lower state taxes mean they sell for $1.50 per pack while cigarettes costs more than $5.

Supporters of the move say little cigars are marketed to youths.

“They go after this stuff because the packing looks like candy,” Kenna Kingsley said about fellow teens.

Marketers said a required state tax stamp would not work on the smaller little cigars packages, effectively ending their sales in Minnesota if they are classified as cigarettes.

Exchange funding changed

Funding for a mostly online health insurance marketplace was changed Thursday as it was approved 8-4 in the Senate Taxes Committee.

The committee approved an amendment that would finance the exchange through the Health Impact Fund, which holds money collected from tobacco product taxes.

The original proposal required the state to withhold 3.5 percent of insurance premiums collected for policy sales to pay for administrative costs.

Republican Sen. Dave Thompson of Lakeville said he felt the bill was being pushed through and wanted more time to discuss the amendment.

“There’s this compulsion to really move this,” Thompson said. “Now we are voting on a bill, presumably soon, that has completely changed in its nature.”

Thompson also said the tobacco tax “is one of the most regressive taxes that exists” and hits low- and middle-income Minnesotans harder.

Committee Chairman Sen. Rod Skoe, DFL-Clearbrook, pointed out the fee already is in place, only now it would fund the health insurance exchange.

Chief author of the bill Sen. Tony Lourey, DFL-Kerrick, said he thinks there has been thorough discussion in the many committees where the bill has been heard so far.

Lawmakers face a March 22 deadline to pass a bill so the exchange can begin Oct. 31.

Contracts approved

The Senate voted 40-25 Thursday to approve public employee contracts that include salary increases.

The House is expected to debate the measure as early as Monday.

The contracts include a 2 percent wage increase for employees, starting retroactively from Jan. 2. But some workers could receive different changes, depending on scheduled increases and other factors.

Senate Majority Leader Tom Bakk, DFL-Cook, said approving the higher wages is “hardly unreasonable.”

“I think they deserve more than that,” he said.

Republicans said the plan does not align with similar private sector jobs.

“This state employee contract is out of line with what the rest of Minnesota workers are seeing,” Sen. Dave Thompson, R-Lakeville, said.

Republicans tried to propose a number of amendments to the bill, but Senate President Sandy Pappas, DFL-St. Paul, said lawmakers needed to approve or deny the contracts, not make changes after they were negotiated.

Agencies would have to absorb the $76.2 million increased cost for 2013. The contracts will cost about $249 million in 2014-2015.

The contracts are for employees part of AFSCME Council 5, MAPE, AFSCME Correctional Officers, the Middle Management Association and State Residential Schools Association.

Commissioners OK’d

Democrats who control the state Senate are approving many of DFL Gov. Mark Dayton’s commissioner nominations after Republicans last year did not take action.

On Thursday, the Senate approved Human Services Commissioner Lucinda Jesson, Transportation Commissioner Charlie Zelle, Revenue Commissioner Myron Frans, Education Commissioner Brenda Cassellius and Health Commissioner Ed Ehlinger.