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Minnesota Legislature

Cigarette, cigar tax increase may return

Despite continued progress, smoking is still the leading cause of preventable death in Minnesota.

An idea held over for possible omnibus bill inclusion by the House Taxes Committee, however, would use the power of the purse to deter tobacco consumption.

Sponsored by Rep. Mike Freiberg (DFL-Golden Valley), HF2790 would increase and impose an inflation adjustment on the cigarette excise tax. It would also raise the maximum tax on premium cigars. Its companion, SF2586, sponsored by Sen. Matt Klein (DFL-Mendota Heights) awaits action in the Senate Taxes Committee.

The measures Freiberg proposes would not be unfamiliar to Minnesotans. An inflation adjustment on the excise tax was previously enacted 2013, along with a premium cigar tax. The inflation adjustment, however, was repealed in 2017, and the $3.50 maximum rate on cigars was reduced to 50 cents that same year.

“Research shows that higher tobacco prices help people quit, prevent youth smoking and save lives,” Freiberg said.

A portion of the tax revenue generated by the bill would be appropriated to a tobacco use prevention account controlled by the Department of Health. The bill is supported by the American Cancer Society’s Cancer Action Network, largely due to those prevention and cessation measures.

“Tobacco cessation and prevention programs serve to address broader issues caused by tobacco-related health and social costs by protecting the state’s most vulnerable residents from the ravages of tobacco use,” said Ellie Beaver, the network’s government relations director. Beaver also noted the measures help lay the foundation for a healthy and productive workforce.

However, the bill is a concern to premium cigar store owners like Mark Wolk and Rick Baker. They say the $3.50 maximum tax hurts small businesses like theirs.

WATCH Committee discussion of the bill

“Please remember that we are not big tobacco companies,” said Wolk, owner of Stogies on Grand. “We are small businesses that had to take on the burden of those huge tax bills every month. Just like other industries, we have employees that rely on us for their income. That tax made it very difficult to hire new employees.”

Wolk said increased taxes would drive dollars away from small businesses and toward internet retailers. Baker, president of Tobacco Grove, said Maple Grove customers abandoned internet retailers last year and returned to his shop to support a local business once the tax cut made it affordable.

Rep. Diane Loeffler (DFL-Mpls) pointed out that niche businesses like Wolk’s and Baker’s aren’t the only ones taking advantage of the reduced 50-cent tax.

“Last year we did something in the tax committee that I don’t think I’ve ever seen before, which is we redefined a product,” Loeffler said. “We redefined ‘premium cigars’ to not be just those that are hand-rolled, but instead allowed machine-made cigars. We broadened the market of premium cigars.”

Under the new definition, Loeffler says, convenience stores and other shops could market their cigars as premium and take advantage of the lower tax.


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