Minnesota's Misguided Cigarette Tax

Minnesota failed to fix its budget with a cigarette tax in 2005. And the state will fail if tries again.


There is a sense of bitter irony in Democratic Minnesota Gov. Mark Dayton's new cigarette tax proposal, which is aimed at bridging the Gopher State's budget gap. In 2005, then-Gov. Tim Pawlenty used an increase in cigarette taxes—which he called a "user fee"—to solve a state budget crisis that had shut down the government. Yet today Minnesota finds itself right back in state finance hell.

With his government ground to a halt for a week now, Gov. Dayton's proposed $1 per pack increase on cigarette taxes was offered as an alternative to an income tax surcharge on millionaires, but state Republicans rejected it anyway, on the grounds that any tax increase was off the table.

Lost in the shuffle is the fact that Pawlenty's "user fee" and Gov. Dayton's proposed pack attack are problematic for more than just political reasons. Trying to cover a budget shortfall with a cigarette tax—or any sin tax—is an irresponsible idea. Taxes on cigarettes tend to drive business out of state and yield unreliable revenue, which only creates future budget woes. And cigarette taxes are not user fees—since the specific tax revenues are not used on services for smokers, but instead go towards general state spending.

Lawmakers in St. Paul and in other state capitols should read the warning label from Minnesota's 2005 tax "solution" and recognize that revenue from cigarettes does not tackle the underlying issue—government spending that has outpaced revenues.

Even if the proposed tax were accepted and the budget passed in Minnesota, the state could be right back where it started within just a few months. Additional revenue from Gov. Pawlenty's 2005 tax increase was estimated to generate $174 million per year, but Minnesota's cigarette tax revenue has only increased by an average of $4 million per year—a paltry 2.72 percent of the estimate.

And Minnesota isn't alone: A 2008 Maryland cigarette tax increase only yielded 50 percent of projected additional revenue while cigarette tax revenue in Illinois has decreased by $69 million since 2007. Overall, only 30 percent of cigarette tax increases between 2003 and 2007 have met revenue projections—not a record on which to stake a state's future. No matter what projected additional revenue Gov. Dayton thinks a $1 per pack cigarette tax increase will yield, it will most likely not come to fruition as regular smokers go elsewhere to purchase their cigarettes and causal users cut back.  

When New York raised its cigarette tax in 2010, neighboring counties in Vermont and Pennsylvania saw an increase in cigarette sales of between 17 and 30 percent. This is because while increases such as Gov. Dayton's proposal—which would raise the total tax per pack to $2.23 in Minnesota—are not enough to impact consumption, they are enough to drive smokers to shop out of state. New Yorkers simply took a little trek across the state border to save a few dollars. Those few dollars add up over time.

Minnesotans might do the same, traveling to the Dakotas or Iowa where tax rates on cigarettes are much lower. And the current rate in Minnesota is already three times North Dakota's rate.

More damningly, the "Land of 10,000 Lakes" would lose revenue from cross border purchases from Wisconsin, where a $2.52 tax rate on cigarettes drives business away. The lost consumer traffic and subsequent depleted tax revenue would not be good for Minnesotan businesses or the state's budget shortfall.

States with high cigarette taxes tend to be more fiscally irresponsible than others. Of the top 10 highest cigarette taxing states, six received a C+ or worse in the most recent Pew Center Money Performance rating, which examines a state's fiscal responsibility. The correlation is typically because increasing cigarette taxes is often a last resort when real fiscal responsibility has been eschewed.

Minnesota has a spending problem, as do a number of other states facing budget gaps for next year—such as Nevada, Oregon, and Texas. It is time for governors and state lawmakers to take a cue from the Minnesota déjà vu and recognize that taxing cigarettes won't solve the underlying problem.

Anthony Randazzo is director of economic research at Reason Foundation. Carson Bruno is a research assistant at Reason Foundation.

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  1. Ghostbusters was a really good movie. I also greatly enjoyed the video game from a couple years back.

  2. As a life-long non-smoker, I’m shocked at how expensive cigs are….

    1. As someone who quit 13 years ago, I am too. Even here in FL., the cheap ones are going for almost $5 a pack.

      1. They’re $10/pack in Seattle. Katherine, years ago, posted a story about, which was a site run by Seneca Indians in upstate New York. So I started buying my American Spirits from them at $3.55/pack, which was half what I was paying in CT at the time. But then a few months ago, they mysteriously stopped taking orders and their site was shut down. I don’t know what happened, but it was a real shame as they were cheap, fast, and easy, just like I like my women smokes. Really great service from them.

        1. Even back when I smoked, I thought the price was too high. So I used to roll my own – and Drum tobacco was like American Spirits – no additives. (The Feds recently put a tax on loose tobacco seriously limiting the price benefit).

          The website I linked to has a “only Iowa customers” banner, so maybe the website you went to was busted by the Feds acting for states losing too much tax money.

          1. If you roll your own, buy pipe tobacco. Its the same tobacco, just cut a little longer, and isn’t included in the 200% tax hike Obama effed us in the a with.

        2. Looks like your website is back, bro. Although there’s a big disclaimer that it’s only for pricing and all sales are made over the phone.

          1. Srsly? I will have to check that out. I fucking hate paying all the taxes to the fucking government, and get a special thrill out of circumventing them. Like when I was in Eastern WA a few weeks ago and came across an “Indian” smoke shop (if those people were Indians, they were some new kind of white Indian I’ve never heard of), but they were 66% the price they are in Seattle.

            1. Our local “Indian Smoke Shop” is run by a kindly old Chinese couple…

          2. Hooray for laws that eliminate technological progress! Maybe they can write a law dictating that cigarettes can only be shipped via horse-drawn buggy too, wooooo!

            1. Damn, the American Spirits went from 3.55 to 5.50 a pack, and now do they not only take orders only by phone, they say it takes 10-25 days for delivery (they used to get them to me in 3-5, every time), and there’s nothing they can do about that.

              Maybe they’re a front for a Federal sting now, natch.

              1. Or they really did switch to horse-drawn delivery…

              2. 10 to 25 days is about the time necessary to secure the search warrant, assemble the swat team, load the weapons and find your house. Good Luck.

              3. Epi, try these guys. They ship your smokes from the Ukraine (which takes 3 to 4 weeks), but I get my Marlboros from them for about $3 a pack. Plus, it’s fun to try to decipher the “these things will kill you” warning labels.

        3. But then a few months ago, the women mysteriously stopped taking orders and their sex site was shut down. I don’t know what happened, but it was a real shame as they were cheap, fast, had no standards, and easy, just like I like my mommy. WHAAAAAAAAAAAAAAAAH.

        4. They passed a law banning internet sales of cigarettes, IIRC. All you can buy now are filtered cigars. It is a shame. Like you said, it was cheap, fast and easy.

          1. So them taking phone orders is how they circumvent it, I guess. 10-25 days is a long delivery, but at half the price…

            1. It’s not half the price for me in Jersey. It’s about the same price as Delaware not including the gas and tolls. I’m only about 40 min from Delaware. For me, I’d rather pay the gas and tolls and not have to wait 3 weeks.

    2. I’ve never smoked in my life either and I still want to put my foot through a wall when I hear about another smoking restriction becoming law.

    3. Not to thread jack (actually to completely thread jack) but this is a personal note to Tony and all the other liberal pansies. Fuck off and die you self righteous piece of shit mother fucks (and yes she did love me long time). If I ever see you on the street I will personally shove a pack of Camel lights down your statist fucking mouth and enjoy every second as you slowly die choking on $7 dollar a pack sweat smokey goodness.

      1. After having had a chance to smoke a cig, I can say nevermid. However if you wish to off yourself, please go ahead.

  3. I live in MN and I realize if spending cuts aren’t enough to balance the budget, the state must find new ways to make new revenue such as expanding the sales tax and/or cutting all loopholes. By the way, MN still has a deficit with just cuts. The approach to solve this are increasing revenues and decreasing spending. Here’s a useful site:

    1. I am sure there is just no possible way to make further cuts. God knows how lean our state governments run already.


    2. You are in luck. Michele Bachman has a sexy-time Jesus pledge thing going on. I reckon it’ll save your ship of state from sinking…

    3. Funny, using your site, just using cuts and changing medical assistance to a subsidy, I got a 2.2 billion dollar surplus.

    4. By the way, MN still has a deficit with just cuts.

      Then you didn’t cut enough.

      1. That or I forgot to extend the sales taxes. Thankfully we have three major parties in MN instead of two. We still have alcohol and car sale blue laws

        1. Car sales blue laws? They can’t sale cars on Sunday?

          1. No, they can’t sell blue cars.

          2. Are you serious. Do you want to have the god fearing citizens of MN get preyed on by sharp car salesmen on their way home from church? Have you no shame sir?!

            1. Just make sure you buy the Tru-Coat?

              1. I don’t need the fucking Tru-Coat?!

  4. Of course higher cigg taxes could result in lower smoking, less health problems and thus less governemnt spending.

    Even better, require people getting government medical assistance too not smoke. An even better way to cut government expenses.

    1. False. Almost every study ever conducted shows Smoking reduces health care costs. Its good to know theres a whole host of misinformed people out the like yourelf voting for a more intrusive government though.

      1. As long as government is paying for healthcare services, I don’t have a problem at all with increasing the taxes to cut into that.

        I feel the same about all other drugs. They should be legal, but it’s perfectly ok to use taxes to even out the healthcare expenses.

        Also, sin taxes are not a very intrustive form of governemnt. And much better than actually outlawing it.

        1. Also, sin taxes are not a very intrustive form of governemnt. And much better than actually outlawing it.

          For a group that claims to respect the poor so much, I find it odd that they support a two-tiered system of personal choice. Why is making it so only the well-off can have personal freedom such a go-to method for the liberals?

          1. Reading comprehension fail. He explicitly stated that as long as the government was paying for healthcare. Obviously the solution is to get the government out of healthcare.

            1. Sorry, that was a reading comprehension fail on my part. My apologies Coeus

        2. I am currently suffering from Jock itch, which tax are you proposing to cure me of it?

        3. “Conclusions

          If people stopped smoking, there would be a savings in health care costs, but only in the short term. Eventually, smoking cessation would lead to increased health care costs.”-new england journal of medicine. Whole article:

        4. I already pay a higher premium on my health insurance because I am a smoker.

        5. The government never has, and never will pay for a bloody thing. All of their “payments” are taxpayer money. And given the HUGE waste, fraud, and general incompetence of govt. delivery of ANY service, I can’t see why you would be for higher taxes for ANYTHING!

    2. You’re not too bright, are you.

    3. Alternatively, cigarette taxes will increase health care costs due to black market violence.

  5. I’ve heard a nasty rumor, doubtless from a Koch-funded sock puppet, that people still get sick and die without having smoked so much as a single cigarette.

  6. Can someone explain to me why people smoke cigarettes? I mean, I understand why someone would want to smoke tobacco, but it seems that cigarettes are an incredibly expensive way to do this compared to a pipe, a bong, cheaper cigars (maybe?), rolling your own cigarettes with one of those machines, etc.

    1. an incredibly expensive way to do this compared to a pipe, a bong, cheaper cigars (maybe?), rolling your own cigarettes with one of those machines, etc.

      As pointed out above, loose tobacco doesn’t have the price advantage it used to.

      Pipe and cigar tobacco is too harsh to inhale, so it’s not the same experience (might as well ask why they don’t chew instead.) As for bongs, despite what the guy at the store told you, I don’t think anyone actually uses them for tobacco.

      So, to answer your question: Mind your own damn business, that’s why.

      1. I’ve smoked tobacco out of a bong before. For shisha and a few times to test out a jury-rigged one from a gatorade bottle before we used a more expensive substance. It is perfectly possible, although I suppose inconvenient when you are not at home.

        1. a few times to test out a jury-rigged one from a gatorade bottle before we used a more expensive substance.

          So in addition to being clueless about the concept of personal preference, you’re also not much of an engineer. Cool story Bro.

          1. wylie, he was just asking. Even as someone who did roll their own smokes (and saved about 60% in doing so at the time), it could be a pain in the ass, and I’d occasionally buy a pack of Camels.

            Also, they apparently gave out packs of Bugler at the local jail, and I ran into a few people who assumed ‘hand rolled smokes = crook’.

          2. What the hell is your problem?

    2. Convenience. Cigs are a lot easier to just grab and smoke rather than having to pack a pipe (bong, hookah, whatever) or roll one. Also, despite how much legislation there is against smoking, cigarettes are more socially acceptable in the few public areas where smoking is still allowed. If you think you get a nasty look lighting up a cigarette, try lighting up a pipe or a cigar.

    3. The way I look at it is: we all know that smoking is addictive, expensive, and bad for you. So we know that anyone over 30 that smokes is a hopeless drug addict. Therefore anyone under 30 that smokes is a total idiot.
      Feel free to take part if you like, but your right to smoke stops where my nose starts — and stop littering your butts around our commons.

      1. (blows smoke into Robbo’s face)

        Suck it, tough guy.

      2. guess you don’t want any other smell interfering with the enjoyment of smelling your own farts.

      3. Your right to not smell smoke ends where someone is already smoking.

      4. and stop littering your butts around our commons.

        This argument pisses me off so damn much.

        You fuckers took away the goddamn ashtrays.

        What the fuck did you think was gonna happen?

        1. You would accept Jesus as your lord and savior then swear off the devil-tobacco. The littering was a totally unforeseen consequence.

        2. Did we also take away all ashtrays from cars?

          Stop glaring at me when I honk and give you the bird after you throw your butt out the window of your car.

          Sheesh us drunks have learned that you can’t throw empties out the window anymore, why can’t you stop throwing butts out the windows?

          p.s. I do agree with you on the lack of outdoor ash trays. But I’d let you smoke at your desk.

          1. Yes Pope, yes they did. New cars don’t have have to order them special.

            1. Really? I’ll take your word for it and dial back my outrage to 10 (my outrage meter goes to 11 donchaknow?) when I honk now.

      5. Then stop following me fuck around, you (ANR, ASH, or other tobacco funded through the government anti-tobacco group) asshole. Aren’t you guys even trying anymore? Really, isn’t there a way you could bring 3rd, 4th, and 5th hand smoke into this? Hell, doesn’t 6th-hand smoke, where seeing a smoker causes flipper babies, warrant a mention? Where is there would be no cholera or leprosy if there were no smokers mention? You must be an intern.
        The smell of coffee is about the most offensive smell in the world to me, but do I bitch when some asshole brings that carcinogenic, burn-hazard, stank juice near me? No, I shut the fuck up and move up-wind. I sure as shit don’t hang out in coffee shops unless I want to bang a skank that hangs out there. And thanks for getting rid of the trashcans and ashtrays in public spaces so I have to look at your stinky polystyrene shit liquid cup as the wind rolls it around. Your right to be a smug douche ends when you are in punching distance from me.

        1. “Your right to be a smug douche ends when you are in punching distance from me.”

          Ah, the 35th amendment.

          1. Coffee causes cancer?

            Well, just fuck,

            1. “Your right to be a smug douche ends when you are in punching distance from me.”

              Not drinking coffee causes PMS?

              1. Sorry, just felt like spouting bullshit. I used to be paid to post comments, and this comment sounded like the type of comment I used to post. I probably should have sited where I got the information, but I am lazy. Robbo’s comment will get him paid. I think I am angry with myself, I used to do the same thing, and probably for less money too. I do apologize for the hyperbole…and any misspellings or grammar fuckups. I think it is the 47th amendment, not the 35th, that involves the whole punching thing. Of course, it could be the 52nd for all I know.

      6. You’re right to say stupid shit ends where my ears begin.

        You’re right to an ugly face ends where my eyes begin.

      7. I used to smoke, and actually quitting is quite easy, taking only the smoker’s realization that the positives of smoking are outweighed by the negatives, and it doesn’t take a case of cancer to get there.

        I agree that littering is a problem, but frankly, people in general are pigs, witness the food wrappers, pop cans, dog crap, etc. you see on any city street.

        As for your nose, if the smoke is not directly blown at you, and you are not physically allergic to smoke, I think you’re overreacting. Do you run away from a campfire while camping out? I think both sides need to give the other a break, and stop acting as if the other was the devil himself. Restaurants and enclosed spaces (airplanes, elevators, etc.) should obviously be off limits to smokers, although I am old enough to remember when smoking was allowed in both places, and frankly, it was irritating at worst, unnoticeable at best. Let’s all RELAX!

    4. Hinestly, because the little woman will put out much more readily than if I have my mouth full of skoal.

    5. This is why I personally just masturbate with my own home grown tobacco leaves – twice the pleasure at a fraction of the cost!

  7. What is this I don’t even

    Is there an official RMVP browser that comes with a Google alert set for “cigarette tax” or something?

  8. Is there an official RMVP browser that comes with a Google alert set for “cigarette tax” or something?

    It got posted on fark.

  9. a ‘user fee’, and there was me thinking our politicians in the UK were chief word playists!

    1. Actually T-Paw called it a “Health Impact Fee”.

      But it was NOT a tax!!! T-Paw would never sign off on a tax!

  10. Weed is so much better then tobacco. In every way. Seriously dude.

    1. I can’t wait to see the User Fees applied to legalized weed…

      1. If they’re too high it will just perpetuate the black market. Of course common sense like that will definately be lost on the nannys. They’re idiots as I’m sure you know.

        1. No, that’s what they’re counting on, so they can say “See? Look, we tried it your way and the problem just got worse! Legalized marijuana IS A FAILURE!!”

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    2. Weed is so much better then tobacco. In every way. Seriously dude.

      Incorrect. Tobacco contains nicotine. Nicotine increases reaction time, ability to focus, and effectively doubles the short term memory. It also decreases appetite. Marijuana does none of those things. In fact, it frequently has the opposite effect.

      1. Upon review of my comment I make a correction:

        Marijuana can increase the ability to focus for chronic users.

        1. I stand by my original comment. Our definitions of “better” may differ Mr. Tobacco lobbyist:)

          1. You’d have an argument if you’d drop the “in every way” part.

            1. The first and second (and last) time I successfully quit smoking the only thing I used was…marijuana. I wouldn’t even think about cigs for a good hour and a half. It’s been almost five years now.

              I am so glad I quit. Forget the money, I actually have some cardio endurance now. It’s awesome.

  11. R.I.P. Betty Ford

    1. Good riddance.I now know where to take a piss in Grand Rapids.

    2. She seemed remarkable for her time

  12. Also off topic (as this appears to be the weekend thread)

    The Democratic Senatorial Campaign Committee asks Koch Industries for donations

    Koch responds. lulz ensue.

    Tone deaf panhandling or mafia extortion tactics? You be the judge.

    1. “force through their extreme agenda faster than you can say ‘Koch Brothers.'”

      Hmm, I would have sent a check for 99cents. Those Koch pussies don’t have a sense of fun

      1. I would think that proving to the Democratic faithful that their leaders are hitting up the Evilest Capitalists Ever for cash would be fun in its own way — in the way that crushing people’s (stupid) dreams can often be.

    2. A bonus: Lonewacko is posting in the comments whining about the Koch brothers reducing barriers of trade with Mexico

      1. Why can’t we have LoneMoron back? Why, reason editors, why?

    3. I’m inclined to incompetence as an explanation the Dems have a list of rich people and panhandle the people on the list.

      But the other explanation is at least plausible:

      “Mr. Koch, I know that some of our overenthusiasic people have been saying bad things about you, but I’m sure it’s something that we can resolve. On a totally different topic, we have several levels of donation. For $100,000 we have the Stop Running Ads Against Me package. For $500,000 there’s the Say Something Nice About Me and Give My Company a Couple Million in Stimulus Money package. If you want to give $10,000,000 we provide the Platinum Package, where we not only stop negative ads against you but appoint one of your employees to an undersecretaryship in a Cabinet department of your choice, or a commissionership in a regulatory agency of your choice.”

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  16. Weed is so much better then tobacco. In every way. Seriously dude.

  17. Wow, I never even thought about it like that before. WOw.

  18. So NASA pretty much ends today. No more spaceflight for America.

    Who will replace us as the leading pioneers in space you ask? You got it! China.

    Why aren’t we planning more missions to the moon and lone to Mars? The private sector can’t explore space on its own. It needs to either be done by the state or under the direction of the state. And the Chinese will prove this as they leapfrog us in yet another field. Are we going to sit by and just let it happen?

      1. No. We are going to learn from the masters, and initiate our new space program:
        Once it is developed, we steal their technology .

    1. Da Troof! Man, you’re a fucking idiot! This is just the first link Google showed me. Thera are approximately 8.3M more.

      Have a shitty day, asshole.….._companies

      1. They are limited to commercial exploration, rockets for satellites, and are not capable of true space exploration. He’s right

  19. The private sector can’t explore space on its own.

    “Look, boy. Do you see where the water ends, and the sky begins? That is the edge of the earth, and if you sail past that point, your ship will fall into the Void, and you will be devoured by strange and horrible monsters.”

  20. Eff any politician who feels that so-called sin taxes, which is just another term for “I’m an elected official who is as dumb as a box of broken hammers”, is an honorable means of revenue generation.

    I propose a user fee on politicians for the use of their offices, staff, federal buildings, etc. Hey, all those things belong to We, The People, right?

    1. “We, The People, right?”

      Megadeth agree with you

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  22. “The private sector can’t explore space on its own.”

    If it’s worth doing someone will and make a profit at it.
    If it isn’t, the government will waste your money doing so anyhow.

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  25. I haven’t smoked for three weeks and I’m glad. I’m glad my money isn’t financing stupid anti-smoking campaigns. I’m glad I no longer have to walk to a smoking shelter in the parking lot like a goddamm homeless person. I’m glad the state can no longer use my tobacco taxes to finance themselves. It’s a damn shame the way smokers are treated, so you know what Uncle Obama? I won’t let you exploit me no more.

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