State Sen. Carla Nelson (R-Rochester) recently proposed two tobacco-related tax increases in the Minnesota Senate. One would increase the price of “little cigars.” Under her proposal, Nelson says that they would be taxed an additional $4 per pack, bringing their cost to around $6. The second proposal would increase the cost of cigarettes by $1.29 per pack.
The cigarette tax proposal is an annual one for Sen. Nelson. She pushed the same legislation during the 2012 legislative session, when Republicans controlled both the House and the Senate. With Democrats running both chambers this year, she has suggested using the proceeds from her tax proposals to reduce state property taxes.
It fits in well with Minnesota Governor Mark Dayton’s general plan to raise sales taxes on other items in order to reduce property taxes. Yet the dynamics become more complex when we account for the fact that Republicans want to oppose Governor Dayton’s plans.
Sen. Julianne Ortman was quoted last week, saying of the governor, “I can't imagine why we would take sales tax dollars out of the pockets of middle income and poor Minnesotans just to write a check to property owners in the state of Minnesota.”
Of course, the tax probably won’t bring in any substantial revenue. Presently, the tax on a pack of cigarettes in Minnesota is $1.23. North Dakota taxes them at a rate of just .44 cents. If Minnesota increases the tax to $2.52, as Sen. Nelson proposes, every neighboring state except for Wisconsin (where the tax is also $2.52) will happily sell them to Minnesota residents for less. Studies have shown that tobacco revenues can even decline after a tax hike.
More than simply looking for tax revenue, Sen. Nelson is looking to pressure people in to making lifestyle choices that she can support. While that is quite thoughtful of her, one must wonder why overtaxed Minnesota needs more than one party trying to raise taxes.
Hopefully, the state’s Democratic majorities will have the same inclination as some of their Republican colleagues to oppose initiatives originating on the other side of the aisle. At least in this instance, it will help to keep taxes a little bit lower.