City to enact cigarette rolling paper tax

In Alexandria, LA cigarette rolling papers will have an additional $1.50 per pack tax added - to discourage pot smokers.

Would a tax on Doritos and Twinkies after midnight make more sense?

An Un-Stately Approach - States Lying About Where MSA Funds Go

An Un-Stately Approach - July/August 2004

Who are the states trying to kid? Their grand statements on how they will allocate their MSA and tobacco excise tax monies are nothing but grand lies.

Remember when the MSA was signed and the states held press conferences proclaiming how they would spend their funds (up to $246 billion over a 25-year period)? They prioritized smoking education, cessation, and research; they proudly rattled off protecting youth and improving public health. By Renee M. Covino

Then in subsequent years--including this one--bills for raising tobacco excise taxes were proposed. Each year, state legislatures reiterated their grand proposals to fund tobacco control and health-related programs. They talked convincingly of using the money for public health and protecting our kids.

And now that more than five years have passed since all this began, there's one thing that still rings true--the states sure know how to talk a good game. Their ploy has been likened to the classic "bait and switch" scheme where advertisers lure people in with one great deal--only to sell them something else--typically half as good and twice as expensive. In this instance, smokers are being reamed with taxes and all constituencies are being taken for a ride--sometimes on new golf carts that were purchased with the MSA money (such as in the state of New York, see "Found" chart, page 60).

For a while now, we've seen it coming. Two years ago, the National Conference of State Legislatures (NCSL) analyzed state plans for spending MSA funds during fiscal years 2000 through 2003. Of the total $33.1 billion in MSA funds that states were to receive during this period, the NCSL found that more than half of the money was earmarked for projects totally unrelated to smoking.

More recently, on the MSA's fifth anniversary last November, a coalition of public health organizers, including the Campaign for Tobacco-Free Kids, released a report entitled "A Broken Promise to Our Children: The 1998 State Tobacco Settlement Five Years Later." The study found that only four states--Maine, Delaware, Mississippi, and Arkansas--currently fund tobacco prevention and cessation programs at minimum levels recommended by the U.S. Centers for Disease Control and Prevention (CDC), which usually amount to only about 20 to 25 percent of a state's annual settlement payments. "Thirty-eight states and the District of Columbia fund tobacco prevention programs at less than half the CDC's minimum level or provide no state funding at all," according to the report.

The summary highlighted that "five years after the November 1998 state tobacco settlement, we find that most states have failed to keep their promise," and that "the states lack credible excuses for their failure."

And just this March, the United States General Accounting Office (GAO) released a report after surveying the 46 states that signed the MSA (Mississippi, Florida, Texas, and Minnesota negotiated separate settlements with the tobacco industry before the MSA was signed in November, 1998). The GAO found that the states used the largest portions of the fiscal year 2003 payments to address budget shortfalls. What's worse, the portion allocated to meet budget shortfalls

Here's the plan:
Raise cigarette taxes so the hugely profitable insurance industry makes more revenue by not paying the state a "providers tax" even thought they know that smuggling will increase and mostly lower income people will be paying the tax. Those insurance ececutives have about as much class as the tobacco executives!


Blues Back Higher Cigarette Taxes from the St. Paul Pioneer Press - 11/27/04

BY DAVE BEAL

Blues Back Higher Cigarette Taxes

Insurers press for $1-a-pack increase, saying proceeds could cut other health-related taxes.

Minnesota's excise tax on cigarettes now ranks below similar levies in 36 other states, a circumstance almost beyond belief.

Just 13 years ago, the state had the highest cigarette tax in the land. Minnesota has been fertile ground for a litany of anti-smoking firsts.

Blue Cross and Blue Shield of Minnesota thinks it's time for a change.

The Eagan-based health insurer is launching a major drive to get legislators and Minnesota Gov. Tim Pawlenty to approve a $1-a-pack increase in the tax.

It won't be easy, despite the compelling public health and revenue-generating arguments for such an increase.

If this move succeeds, the state's cigarette tax will triple to $1.48 a pack from 48 cents and vault the state's ranking to ninth place.

Plenty of efforts to boost this tax have fizzled since it was last increased, in 1992, but that's history now. Phil Stalboerger, Blue Cross director of legislative affairs, says a shifting public mood has led his associates to assign top priority to the proposal.

The organization will publicly launch its drive in mid-December. Already, it has touted its plan in letters to chambers of commerce. It is reaching out for support from many health care organizations and mapping an ambitious lobbying effort.

"We have never undertaken this kind of effort on the cigarette tax," says Stalboerger.

That commitment counts for a lot.

Blue Cross is the largest health insurer in the state. It stepped forward a decade ago to help the state take on Big Tobacco in gutsy litigation that ended with a landmark triumph. The tobacco industry agreed to a record $6.6 billion settlement in 1998.

Jeanne Weigum, president of the Association for Non-Smokers Minnesota, says that Blue Cross provides the quality analysis and the shoe leather needed to build a strong, flexible alliance.

Based on a Minnesota Revenue Department analysis, the insurer estimates that a $1 boost in the tax would generate at least $260 million a year for the state. That's after adjusting for the certainty that higher prices for cigarettes would reduce demand for them.

Blue Cross suggests applying the proceeds to do away with three existing levies, thereby slashing premium costs falling directly on small businesses by an average of 3 to 4 percent.

3 LEVIES TARGETED

About $100 million would replace the assessment that finances the Minnesota Comprehensive Health Association's assigned risk pool.

Another $100 million would replace the insurance indemnity tax, which is levied on buyers of health care insurance.

And $60 million would replace a premium tax levied directly on small businesses or individuals.

Stalboerger says the plan meets the rising clamor from thousands of the states' small businesses for relief from soaring health care costs. The Minnesota Chamber of Commerce and a mounting stack of surveys say these costs are the top concern of Minnesota's small businesses.

Directly or indirectly, the new revenues from a higher tax could ease the state's tight budget squeeze.

The $1 increase was recommended early this year by a Pawlenty-appointed citizens forum led by former U.S. Sen. David Durenberger.

Blue Cross also points to a survey it commissioned last spring from Decision Resources.The survey found that two of every three Minnesotans back a $1 boost in the cigarette tax and seven of eight think that tobacco-related illnesses are an important factor affecting health care costs.

Fresh signs of anti-smoking sentiment have come from the governments of Minneapolis, Bloomington, Golden Valley, and Hennepin and Ramsey counties. All recently approved tough new measures to curb smoking in restaurants and bars.

WHY NOW?

Yet many of these feelings have existed for years in Minnesota. What has changed to drive down the state's cigarette tax ranking so dramatically?

Most of all, many other states faced with serious budget pinches see tobacco tax boosts as an easy route to more revenue.

Just since 2002, 36 states raised this tax, according to the Minnesota Smoke-Free Coalition.Fourteen of them moved ahead of Minnesota in the rankings. Republican and Democratic governors in these states have concluded that a notably higher cigarette tax is "prudent heath and fiscal policy," says the coalition.

Many say the Pawlenty administration's firm opposition to tax increases is another reason the tobacco tax hasn't changed here.

Asked whether Pawlenty could support the Blue Cross plan, Minnesota Revenue Commissioner Dan Salomone said it "would depend on the specifics of the proposal." The governor has always said such tax packages must be "revenue neutral," meaning tax increases have to be offset by tax decreases.

LEGISLATORS AT ODDS

Previous proposals to increase the tax have run aground after serious disputes among legislators about how to use the proceeds.

State Rep. Fran Bradley, the Rochester Republican who heads a key House panel that has dealt with the issue, backed a 29-cent-a-pack increase this year. That would have brought the Minnesota tax up to Wisconsin's level. In the past, he has supported increases of as much as $1.

Bradley says past cigarette tax increases haven't gone anywhere because of serious differences with the DFL-controlled Senate over how the proceeds would be used.

Sen. Linda Berglin, DFL-Minneapolis, head of a Senate panel handling such legislation, says the state should consider using the proceeds from an increase to prevent health care service cuts. Recent proposals to increase the tax failed because the governor didn't support them, she adds.

And of course, tobacco lobbyists oppose increasing the tax. "They're very good at what they do," says Weigum.

The Minnesota Medical Association has softened its position backing a cigarette tax only if the proceeds go toward eliminating the provider tax for MinnesotaCare, the insurance program for low-income Minnesotans. That improves the chances for the Blue Cross proposal.

But state chamber officials have reservations about the plan, despite the relief it offers small businesses.

Some of the business group's concerns come to the economics of the tax increase. It would be regressive because lower-income people smoke more. It would raise Minnesota's cigarette tax well above those in many neighboring states, a situation that could invite incursions by the tax-evading cigarette bootleggers who have made inroads in the Northeast.

Blue Cross, which knows how to scale the mountainous challenges of tobacco land, has embarked on another big climb.

Minnesota's House of Representatives Research on Cigarette Taxes

Some exerpts:

*Numerous states have recently increased their cigarette tax rates to balance their budgets or to fund program initiatives.*

*Settlements of the states' lawsuits against the tobacco companies have about the same economic effect as a cigarette tax, since these settlement payments are passed along to consumers (nationally) through higher cigarette prices. To compensate partially for the lower prices of nonsettlement cigarettes, the 2003 Minnesota Legislature imposed a 35-cent per pack "fee" on manufacturers who did not settle with the state. Michigan and Utah also impose a 35-cent surcharge on these cigarettes; Alaska imposes a 25-cent surcharge.*

*For fiscal year 2005, the Finance Department estimates collections from the two taxes will be about $182 million. Revenues from the tobacco products tax are deposited in the general fund. Revenues from 6.5 cents per pack of the cigarette tax go to fund the Academic Health Center, 2.5 cents to the medical education and research account, and the rest are deposited in the state general fund.*

Cutting Through the Smoke - Facts on the Cigarette Tax

Cutting Through the Smoke: Facts on the Cigarette Tax
SACRAMENTO--Whenever government tries to dictate people's economic behavior the result is usually dismal failure. Why? According to Milton Friedman, it's for the same reason that even the most autocratic head of a family cannot control every act of each family member. Unless commands are supplemented with people's willing cooperation, the commands are often undermined or ignored.

Take, for example, cigarette taxes. Many state governments have increased cigarette taxes in an attempt, basically, to prevent people from smoking. Yet, in a recent report by the Center for the Study of American Business, a research organization at Washington University in St. Louis, economics professor Dwight Lee found that high cigarette taxes haven't had the intended effect.

In 1994, Michigan raised its cigarette tax from 25 cents a pack to 75 cents. A year after the tax increase, legal cigarette sales in Michigan fell 30 percent. The key word here is "legal" cigarette sales. According to the Detroit Free Press, "Michigan's higher tobacco tax has spawned rampant cigarette smuggling." Also, cigarette sales in low-tax states that are only one day's drive from Michigan have skyrocketed. Thus, Prof. Lee notes that even though legal cigarette sales dropped in Michigan, the percentage of smokers actually increased.

In 1988, California increased its cigarette tax from 10 cents a pack to 35 cents. Legal cigarette sales fell 28 percent. However, with the proximity of low-taxed cigarettes in Mexico, Indian reservations, and military bases, contraband cigarettes began flooding the state. Contraband sales account for up to nearly a quarter of cigarettes sold in California. Prof. Lee concludes that in view of these contraband sales, "smoking in California has not declined since the tax increase by any more than the nationwide average over the same period."

Perhaps the most interesting unintended effect of high cigarette taxes is the impact it has on youth smoking. In Canada, cigarette taxes resulted in massive cigarette smuggling (contraband cigarettes made up 30 to 50 percent of the Canadian market, according to Prof. Lee). Recently, Canada drastically cut its cigarette tax rate, not only to reduce smuggling, but also to prevent increased smoking among young people. How could high cigarette taxes cause increased youth smoking? As Prof. Lee writes, "Contrary to the usual argument, many Canadian officials concluded that high taxes made it difficult to control teenagers' access to cigarettes." In other words, the huge black market in cigarettes created by the high cigarette tax actually made it easier for young people to obtain cigarettes. Canadian Health Minister Diane Marleau explained the cigarette tax cut saying, "It will end the smuggling trade and enforce children to rely on regular stores for their cigarettes, where they will be forbidden from buying them until they are 19."

All of this says nothing about the inherent goodness or badness of smoking. Rather, it merely demonstrates once again that when government tries to dictate our behavior through the tax system, people will find a way to exert their freedom. High cigarette taxes may be emotionally satisfying for the anti-smoking brigade, but it is bad public policy.

--By Lance T. Izumi