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Cigarette tax proposal finding few friends at Minnesota Capitol
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Gov. Tim Pawlenty and Republican legislative allies go over proposals during a round of negotiations with Democrats at the Capitol. (MPR Photo/Michael Khoo)
Gov. Tim Pawlenty's "health impact fee" appears to have landed with a dull thud at the Capitol. It isn't just his political foes who have criticized it, but some usual allies as well.And it's apparently done little to break the budget stalemate; negotiators appear no closer to reaching a deal.

St. Paul, Minn. — Pawlenty's plan has raised the ire of anti-tax groups like Americans for Tax Reform. The group's president, Grover Norquist, says a governor who has been heralded by fiscal conservatives for his no-new-taxes stance has just proposed a tax increase.

"There is no way to put lipstick on that tax-increase pig," he said.

Pawlenty insists his proposal is a fee. It increases an existing cigarette distributor fee, and will be collected at the wholesale level, not by retailers. And some lawmakers argue that any charge on cigarettes is a user fee, because only people who smoke pay it.

"That means a property tax is a user fee because only homeowners pay it, and the income tax is a user fee because only people with jobs pay it," according to Norquist. "No. You cannot do that. This will not fly. I have had many attempts to sell tax increases as something else. No one's even tried that with a cigarette excise tax."

When he ran for governor three years ago, Pawlenty signed the Taxpayer Protection Pledge sponsored by Norquist's group. Norquist says Pawlenty would violate that pledge, and thus alienate anti-tax groups, if he signed a cigarette tax increase into law. He says that would also hurt Pawlenty's chances for higher office, should he seek it.

Pawlenty has said little about his future plans, but there have been rumblings about his potential for a presidential run in 2008.

Pawlenty's legislative allies say the governor should get credit for trying to compromise with Democrats in the Legislature, who want to spend more than a billion dollars more than Pawlenty's budget. Pawlenty spokesman Brian McClung says the governor thought his offer would jump-start negotiations.

"He stuck his neck out a long way and was willing to put another $380 million in revenue into the discussions through the health impact fee, and it's the kind of big movement that we were hoping would elicit a similarly bold response from the Senate DFL," he said.

But Senate DFL leaders have barely responded to the governor's offer. Instead, many Democrats have criticized it. The chair of the Senate Health and Human Services Budget Division, DFLer Linda Berglin of Minneapolis, says the problem is that Pawlenty's proposal would shift some health care funding to education.

"It would be pretty hard for us to go out and tell our constituents that we ended up with a 75-cent cigarette tax, and it was based on the fact that we have health care costs due to smoking, but we aren't willing to give people the health care benefits they need to take care of their health care, and we're going to cut hospitals and pharmacies and a whole bunch of other health care services," Berglin said.

Berglin says she's not opposed to raising tobacco taxes, as long as all of the money goes to health care. And House Democrats have already proposed a 50-cent a pack hike in the cigarette tax. But since Senate Democrats haven't embraced the governor's offer,

Senate Republican Leader Dick Day of Owatonna says Pawlenty should just take it off the table.

"Nobody wants it," according to Day. "Why should he be proposing something, he's got half of us over here getting nervous about him proposing it, they don't want it, they don't want to take it."

Day says he could vote for a cigarette tax as part of a budget deal.

Republican House Speaker Steve Sviggum of Kenyon has been the plan's biggest cheerleader, calling it a bold move and a good plan to end the session. But unless Senate Democrats get on board, it may just be a bold move that didn't end the session.