Don’t Let Sin Tax Money Go Up in Smoke

The American Lung Association, in a recent report, gave Minnesota a failing grade for its anti-smoking initiative. Among the factors that played into the state’s poor performance was the current sin tax on cigarettes that the ALA has deemed to be too low, going so far as to call for it to be increased tenfold. While Governor Dayton’s budget does not go that far, it does include a 94 cent tax increase per pack. The last time we increased surcharges on cigarettes was in 2005, when we enacted a 50 cent “health impact fee.”

It was a fee of course, not in any way a tax. Fees are distinguishable from taxes by their magic powers to protect conservative legislators from Grover Norquist. By the way, the current tax and fee per pack is $1.23, below all of our border states except North Dakota.

The cigarette tax is a peculiar organism that endeavors to eliminate the source of its revenue. If it is effectively serving its purpose, it should become an increasingly insignificant contribution to the state coffers as more and more smokers are driven to quit. That said, fewer smokers also represent diminished health care costs, meaning that the cumulative result will theoretically be a net win for the state.

Revenue from the tax and fees are funneled to both the general fund and a series of health initiatives. Two years ago, Minnesota dipped into funds from the state’s 1998 settlement with the tobacco industry that were earmarked for anti-smoking and health initiatives to balance the budget, and continue to be directed elsewhere.

If we do implement a $.94 tax on cigarettes, let's make sure that money is directed to health and anti-smoking programs. Let's avoid using it as a general fund revenue source in an effort to protect the state's wealthiest from paying their share of progressive taxes.

Posted in Fiscal Policy | Related Topics: Public Health  Revenue Sources  Tax Fairness 

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