Bloomington legislator wants much higher cigarette tax

by T.W. Budig
ECM Capitol reporter

House Tax Committee Chairwoman Ann Lenczewski, DFL-Bloomington, held an informational hearing on Thursday (Feb. 7) on her cigarette tax legislation.

Lenczewski is proposing to increase the state’s current $1.23 per pack cigarette tax to $2.83 a pack.

This would place the state’s cigarette tax about 30 cents ahead of Wisconsin’s, which currently has the highest cigarette tax among neighboring states.

Lenczewski’s proposed tax increase is well ahead of Democratic Gov. Mark Dayton’s. who hesitantly proposed a 90-cents per pack tax increase in his state budget.

Lenczewski is hardly apologetic, saying in committee she had been tempted to make the increase even higher. That’s because smokers are sensitive to price, which can be an inducement to quitting, she argued.

Plus smoking-related illness costs nonsmokers billions in terms of impact on the health care system, Lenczewski said.

The proposal, which includes other changes to state tobacco law, would raise about $441 million over the upcoming biennium.

In committee, the legislation was praised and slammed.

Advocates, such as Clear Way Minnesota, say a cigarette tax increase would prevent thousands of teens from starting smoking as they simply couldn’t afford it.

One Blue Cross Blue Shield official testified to the effectiveness of price as an inducement to quitting smoking.

After Republican Gov. Tim Pawlenty’s 75-cent health care impact fee went into effect, calls to the stop smoking line jumped by 65 percent, he said.

But opponents had arguments, too.

Minnesota Wholesale Marketers Thomas Briant indicated that the tobacco increases contained in the bill would drive family-run businesses into the ground.

Some tobacco products would be available online at a third of the cost that state wholesalers would be able to sell them,  he said.

Others argued that tobacco tax increases in other states have failed to generate the anticipated revenue.

A free-market proponent argued human beings, rightly or wrongly, will attempt to get what they want.

If cigarettes become too expensive, it will spawn smuggling and other unlawful means of obtaining cigarettes, they said.

No votes were taken during the hearing, but lawmakers spoke up.

Rep. Greg Davids, R-Preston, said in a district like his, close to the state line, a tobacco tax hike wouldn’t be popular with retailers.

“I think cigarettes are disgusting,” he said.

But he questioned whether a tax increase would solve anything, throwing out the idea instead of a ban on cigarettes.

Rep. Bob Barrett, R-Lindstrom, expressed worry over the regressive nature of the tax.

Health officials point out that less educated, less affluent people are more likely to smoke.

“Smoking is a regressive disease,” Health Commissioner Dr. Ed Ehlinger said recently.

But Barrett, who grew up in such a poor family that he slept on the couch until age 10, said his father smoked two to three packs of cigarettes a day.

It must have cost the family thousands of dollars, but his parents were willing to pay for their cigarettes, he said.

He wondered about the extra burden of increasing the cost of cigarettes to families like the one he grew up in.

The Senate this week approved the employment contracts for Minnesota Association of Professional Employees (MAPE) and American Federation State, County and Municipal Employees (AFSCME) Council 5, but not before some debate.

The contracts would give union members a two percent, across-the-board increase retroactive to the first of the year.

Republicans criticized the contracts for a number of reasons.

Sen. Paul Gazelka, R-Nisswa, argued that state employees are the best compensated in the nation.

Republicans pointed out some of the employees, as part of a step process, could gain additional salary increases on top of the two percent.

“Yes, that’s possible,” Sen. Chris Eaton, DFL-Brooklyn Center, bill author, said.

Sen. Dave Thompson, R-Lakeville, argued public sector employee salaries should reflect the nuances of the private sector.

And these have been stingy, he argued.

Republicans attempted to amend the legislation, arguing union state employees never really faced a “hard freeze” on salaries.

But Democrats, citing state law, countered it wasn’t possible to alter a negotiated contract.

Senators could either vote it up, or vote it down, they said.

Senate Majority Leader Tom Bakk, DFL-Cook, thanked state employees for their efforts.

“Public employees are the employees who teach our children. plow our roads, patch our pot holes, care for us in our hospitals, and, yeah at the end of the day when we all go home, they are going to clean up the Capitol, so it’s all ready for tomorrow,” he said.

“They are going to empty the trash in our offices. And I rise today to thank them,” Bakk said.

About half of the state union employees under the contracts could be eligible for the two percent raise and step increases.

Republican Third Congressional District Congressman Erik Paulsen appeared at the State Capitol on Friday (Feb. 8) pushing federal legislation to repeal a 2.3 percent excise tax on the medical device industry.

“The urgency is real,” said Paulsen, flanked by medical industry officials.

“It’s time to push the panic button,” he said of repealing the tax.

Paulsen,  along with Congressman Rick Nolan and Congresswoman Betty McCollum, both Democrats,  along with 178 other members of the House have signed on as cosponsors of a medical device tax repeal.

Part of the Affordable Care Act, the tax, first collected in January, has Democratic U.S. Sen. Amy Klobuchar poised to introduce repeal legislation in the Senate, Paulsen said.

Because Minnesota has such a robust medical device industry, the excise tax hits the state particularly hard, Paulsen said.

Indeed, as much as a quarter of the $30 billion the tax raises would come out of Minnesota, officials say.

“This tax is killing jobs,” Paulsen said.

The industry officials depicted the tax as thwarting job creation, productivity, competitiveness.

The tax is especially hurtful, they argue, because it taxes revenues, not profits.

That is, a company has to pay the tax regardless whether it’s making money.

Further, for smaller companies, having to pay the tax every other week is particularly arduous in terms of cash flow.

Beyond this, IRS definitions are unclear, Paulsen said, on exactly which medical devices get taxed.

Aaron Holm, whose life has been profoundly touched by the medical device industry, spoke on behalf of the repeal.

Holm lost his legs six years ago in an accident on I-394 while attempting to change a flat tire for a pregnant coworker stranded roadside.

While hefting the spare out of the trunk, Holm was struck from behind by a car travelling on the shoulder at 55 mph, he said.

He remembers after the accident wondering what kind of a life awaited him, Holm said.

He credits a team of health care professionals and the wonders of medical technology with giving him back his life.

They “put me back together,” Holm said.

Within months of the accident, Holm had been fitted with custom sockets and microprocessor knees.

This had him back into his normal life functions within six months.

Holm now works for Tillges Certified Orthotic Prosthetic Inc., the company that developed his prosthetic limbs.

One potential hangup for the House repeal legislation is that it does not identify how to refill the hole it would punch in the federal budget.

Paulsen indicated confidence that legislative leaders could work that out.

The congressman, whose name is mentioned by pundits as a possible U.S. Senate candidate, neither confirmed nor denied interest in running against Democratic U.S. Sen. Al Franken in two years.

“I’m not taking anything off the table,” he said.

The Minnesota Department of Natural Resources (DNR) has closed the moose hunting season in the face of plummeting population.

The moose population in the northeast state fell 35 percent from last year, it was announced.

Based on an aerial survey in January, the state’s current moose population was estimated at 2,760 animals — 4,230 moose were spotted last year.

Since 2010, the moose population in Minnesota has fallen by half.

DNR Commissioner Tom Landwehr in a press release noted the moose population has been in decline for years but never at such a sharp rate.

The most recent estimates were “further and definitive evidence” the population is not healthy, he said.

Hunting is not the cause of the population decline, the DNR argues.

A bill has been introduced in the Senate calling for a moose hunting moratorium. House Environment and Natural Resources Policy Committee Chairman David Dill, DFL-Crane Lake, said his committee would hear no such bill.

Still, the DNR has “taken the right step,” said Dill, in closing the moose hunting season.

His committee will hold a hearing on the situation later in this session, he said.

In committee, DNR officials detailed an aggressive new moose research initiative, one in which they propose to examine collared moose that die within 24 hours of death.

Because of the internal body heat of the animal, a speedy necropsy is urgent because the internal organs rapidly decompose, making it difficult to gather scientific information.

Rep. Dean Urdahl, R-Grove City, is a historian and published author. Recently, in committee, someone suggested a topic for Urdahl to write about.

“It will be like the book I’ll write about this place,” Urdahl said.

“It will be fiction,” he said, smiling.

Tim Budig can be reaches at [email protected].