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Penny More Per Pack: Where Does The Money Go?

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CBS Minnesota (con't)

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ST. PAUL, Minn. (WCCO) – Smokers may or may not notice it but they are now paying more for their cigarettes. A penny a pack, in fact. It’s part of an annual adjustment for inflation.

The penny increase brings the total of taxes and fees to about a $1.59 per pack of cigarettes. Here’s how it breaks down:

  • $0.48 excise tax
  • $0.75 health impact fee
  • $0.35.5 in-lieu tobacco settlement fee

Taxes and fees on tobacco products really add up in Minnesota, totaling $368 million for the state in 2010. Yet that pool of money is shrinking.

“Generally, we’re seeing a drop in revenues and I think it’s mainly related to less consumption. I think prices are kind of holding constant but we’re seeing less and less consumption,” said Jack Mansun with the Minnesota Department of Revenue.

The Centers for Disease Control’s latest survey shows smoking is definitely down in Minnesota, dropping from 22 percent to 16 percent in the past 10 years.

Revenues on tobacco leaped in 2006 with the new Health Impact Fee which was a 75-cent per pack charge on cigarettes. But then the decline in smokers is mirrored in a $50 million decrease in taxes and fees on sales. A penny tax increase per pack won’t move the revenue needle much.

Even if prices don’t cause a noticeable increase in costs, the manager of one shop says smokers will still be unhappy because they’re paying more than their fair share already.

That share put about $163 million into Minnesota’s general spending fund and $192 million into a Health Impact fee fund.

Minnesota’s first tobacco tax in 1947 was 3 cents per pack. Today’s $1.59 per pack is small compared to the $5.35 charged in New York City.

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