President Obama wants to wallop adult smokers again already. Minnesotans were just smacked with a 130% increase on the state tobacco tax to make up (in part) for Governor Dayton’s woeful overestimation of electronic pull tabs to fund billionaire Zygi Wilf’s new Vikings Stadium and now the president wants to sock us again with another 94-cent increase. Smokers pay for a lot of things these days: Other people’s health care, sports stadiums and now the president’s proposed new early learning program.
Since only about 1 in 5 adults are known tobacco users, they make easy targets for politicians. The majority isn’t directly affected, but it’s wrong to keep going back to the same well of often lower-income citizens to fund politicians’ extravagant pet projects – especially as they prattle on about wanting to “tax the rich.”
Tobacco taxes are not a stable funding source for long-term projects. The “expected” revenues from these types of tax increases often fall short of their predictions for a variety of reasons, as evidenced by some states’ decision to re-raise their state tobacco taxes as often as three times over a 10-year period. No taxpayer likes to hear the phrase “tax increase” so we can guess that the state governments responsible for such incessant increases in taxation mistakenly expect the first of their many hikes to do the trick. Now we face the potential for similar circumstances, but on a much larger national stage with much more at stake financially.
Minnesota Majority opposes raising the federal excise tax on cigarettes and other tobacco products because we understand the burden that such an increase can put on local businesses and consumers. In light of the litany of new taxes and tax increases that were enacted this legislative session, we certainly don’t need to compound the new tax burdens. Minnesotans in particular have faced numerous increases in taxation lately, and enough is enough.
For now, the President and Secretary of Education Arne Duncan have their eyes on a 94-cent increase in the federal excise tax on cigarettes – an amount that will nearly double the $1.01 federal tax, in addition to the now $2.83 per pack paid in Minnesota. That would bring the total tax per pack in Minnesota to $4.78. Tobacco companies only make about a dime profit on every pack, so is “big tobacco” the right villain? Or should we call it what it is? “Big government” is without question the biggest exploiter of tobacco users.
For evidence of how unstable cigarette taxes are at the federal level, we only have to look back to 2009, when the federal excise tax jumped from 39 cents a per pack to $1.01. The need for these two tax increases of 62 cents and 94 cents within just four years highlight the difficulty of predicting how much additional revenue an excise tax increase will actually provide. After all, one of the stated goals of increased cigarette tax is to discourage smoking (and thus discourage paying the new tax).
No one understands the burden of unnecessary tax hikes and high tax rates better than Minnesotans. The average Minnesota taxpayer currently pays 10.79 percent of his income in state and local taxes. We also currently pay the fourth-highest state income tax rate in the entire country, and yet our state legislature, while bleating about making the “rich” pay their “fair share,” recently approved legislation to increase income and cigarette taxes in the state even further, hitting the lowest earners with bigger rate increases than the top decile (learn more about that at AmIRich.org).
The increase in state cigarette tax that took effect on July 1st (a 130% rate hike from the $1.23 per pack tax that adult Minnesotan smokers were already paying) speaks volumes about how uncertain the state government knows their “expected revenue” projections are bound to be. The rate and breadth of taxation in the state is getting out-of-hand. People will soon be hit with higher taxes on gifts, new taxes on internet audio and video downloads, and oddly enough, an additional “wheelage tax” on everybody’s car. This is what they mean by “tax the rich?”
Next time you hear a politician talk about taxing the “rich” more, ask yourself, “does this politician think I’m rich?” Odds are, he does.
The proposed cigarette tax is just one of many examples of how Minnesotans of all income levels will be expected to pay more than ever before. With taxpayers expected to shoulder the burden for looming construction of the Vikings’ new football stadium and other programs, it comes as no surprise that arbitrary logic is being applied here. When Governor Dayton said that the backup funding plan for the Vikings football stadium would be “something you’ve never imagined,” he was dead wrong. It’s not hard to imagine taxing cigarettes more. It happens all too frequently. With tax increases being thrown around so loosely in our own state, the last thing we need is for another needless and unsustainable increase in the federal tax on tobacco products. Our elected officials in Washington can surely come up with a better solution than a tired old cigarette tax increase.