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Cigarette tax spawns new debate at Capitol
by Tom Scheck, Minnesota Public Radio
May 25, 2005

Gov. Pawlenty's office hasn't released a specific bill yet on the proposed tax, but he says he would dedicate the entire $380 million to treat smoking related diseases. (Getty Images/Tim Boyle)

Health care providers and other supporters of those on state health programs say they want all of the money from a proposed tobacco tax increase to state health programs. Gov. Pawlenty wants to charge cigarette wholesalers an additional 75 cents on every pack of cigarettes sold in Minnesota. Pawlenty's calling the charge a "health impact Fee." But critics say they're not happy that the "health fee" wouldn't be spent entirely on health care programs.

St. Paul, Minn. — A long line of health care lobbyists, advocates for the poor and religious organizations lined up to testify at the first committee hearing held since Gov. Pawlenty called lawmakers back into a special session. They told members of the Senate Health and Human Services Budget Division that they're happy Gov. Pawlenty wants to increase tobacco taxes on the wholesale level. They say it will decrease tobacco use and raise much-needed money.

But those same testifiers aren't happy with how Pawlenty uses the $380 million that the tax raises. The Joint Religious Coalition's Brian Rusche says his organization typically frowns on cigarette tax increases because they fall more heavily on poor Minnesotans. But he says if the increase becomes law, it should go to nursing homes, hospitals and people on state subsidized insurance.

Gov. Pawlenty's office hasn't released a specific bill yet on the proposed tax, but he says he would dedicate the entire $380 million to treat smoking related diseases. What troubles health care advocates is that Pawlenty also wants to shift $280 million from his original health care budget proposal and dedicate that money to public education. Minnesota Human Services Commissioner Kevin Goodno says the proposal should satisfy Senate DFLers who want increases for schools and health care.

"The net effect is it helps provide revenues and helps us move toward the position as an administration move closer to the Senate's position on education and the Senate's position on health and human services," said Goodno.

But others argue that Pawlenty is relying on accounting shifts in an attempt to dodge the charge he's breaking his no-new-tax pledge. Pawlenty calls the proposed charge on cigarettes a "health impact fee." Critics say he should be calling his proposal a tax since the money isn't all being spent on health care programs.

Sen. Becky Lourey, DFL-Kerrick, says Pawlenty and House Republicans should find another revenue source if they want to provide more money for public education.

"If you're going to do a fee, it should be directly related to the reason it's raised," said Lourey. "This is a health impact fee. I think the regular citizen would say 'well then it should be going to the things in health care budget.'"

The arguments highlight the problems in legislative negotiations. Gov. Pawlenty and House Republicans want to cut people from state subsidized insurance and cut payments to hospitals and spend that money on public education. Senate DFLers are proposing an income tax hike on the wealthiest Minnesotans to pay for increases in both education and health and human services.

Sen. Linda Berglin, DFL-Minneapolis, says the state should figure out a way to pay for both. Berglin and other Senate DFLers say it would be best to negotiate on which programs are needed in the state and then find the money needed to pay for those programs. Those comments upset Republican House Speaker Steve Sviggum. He prefers to figure out how much money they have available and then spend the money accordingly.

Sviggum and Pawlenty say they hope to continue to meet with Senate DFL leadership on a daily basis in the hopes of breaking the stalemate on budget negotiations. They have scheduled open door meetings every day at 11 a.m.