ST. PAUL, Minn. (AP) — Two Republicans state senators on Thursday proposed that so-called “little cigars” should be taxed at the higher rate applied to cigarettes in Minnesota.
Little cigars along with normal-sized cigars are defined as “tobacco products” under state law and taxed at a lower rate than cigarettes. Various state taxes on cigarettes add up to almost two dollars a pack, and the Department of Revenue estimated that taxing little cigars like cigarettes would raise about $6 million in the 2012-13 budget cycle. Normal-sized cigars would not be affected.
That’s not much compared to the $5 billion state budget shortfall, but it’s a case of legislative Republicans actually backing an uptick in a state tax — rare so far in the current legislative session.
Anti-smoking forces point out that little cigars are the same size as cigarettes, are often sold in similar-size packs and are marketed to cigarette smokers. Some come in flavors like chocolate or grape and could appeal to children, supporters of the higher tax rate said.
“Smokers inhale them as deeply into their lungs as they do cigarettes,” said Molly Moilanen, spokeswoman for ClearWay Minnesota, a coalition of health groups. “They contain as much nicotine. They are just as addictive and just as dangerous as cigarettes.”
The bill sponsors are Republican senators Julie Rosen of Fairmont and Carla Nelson of Rochester. Rosen said it’s not for the tax money that would be raised but rather to discourage youths from using the product.
“This is a cute little wrap — pink,” said Rosen, holding up a pack of little cigars at a Senate Taxes Committee hearing on her bill. “This is Camel. And this is a little Swisher Sweet in purple. So who are they really marketing these little cigars to? This is the reason I took this bill, and it’s not for the tax revenue that it would generate. It’s because I wanted to address this with the kids.”
Representatives of tobacco manufacturers and wholesalers said federal studies have shown that only 1 to 2 percent of youth smokers are using little cigars. In addition, they complained that taxing them like cigarettes would create a logistical nightmare for tobacco wholesalers who are required to affix a state tax stamp to all cigarette packs.
Tom Bryant, executive director of the Minnesota Wholesale Marketers Association, said the machines currently used to affix the stamps only work with cigarette packs. He said many little cigars come in packs of different sizes, and that the stamps would have to be attached by hand. Some little cigar packs are too small for the stamps to fit at all, he said.
Right now, 12 states and the District of Columbia tax little cigars like cigarettes. Bryant said he has clients in one of those states, Iowa, that have stopped selling over half the brands of little cigars because of the cost and burden of affixing tax stamps.
“This is in effect a de facto prohibition on the sale of these legal tobacco products,” Bryant said.
Sen. Gretchen Hoffman, R-Vergas, said she doesn’t think the Legislature should adopt the higher rate if the main intent is to discourage smoking.
“I don’t agree with sin taxes,” Hoffman said. “We live in a free country and we have personal choice and with those choices come consequences.”
But Sen. Julianne Ortman, chairwoman of the Senate Taxes Committee, signaled she might support the change — not necessarily to discourage smoking, but in the name of taxing similar products at the same levels. Ortman said she might include the proposal in a larger package of changes to state tax policy.
“My goal is consistency in the tax policies in the state of Minnesota,” Ortman said. “For me, this bill is of significant importance because it seems inconsistent in our tax policies.”
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