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Legislative Notebook: Bill would raise ‘little cigar’ tax

ST. PAUL – Some Minnesota legislators want to raise the tax on “little cigars,” saying the products cost less than cigarettes and they can be flavored as a way to attract children.

Sens. Kari Dziedzic, DFL-Minneapolis, and Carla Nelson, R-Rochester, said little cigars basically are the same as cigarettes, but taxed differently under state law. Their bills would change that.

Dziedzic said the only difference is that little cigars have some tobacco in their wrappers, and they are brown instead of the typical cigarette white.

“Little cigars look, smoke and are marketed just like cigarettes, and they are just as deadly and dangerous,” Dziedzic said.

Little cigars sell for about $1.50 per 20 pack, while cigarettes cost $5, the senator said.

“Little cigars come in peach, grape, strawberry and chocolate flavors and can be purchased for less than $2 a pack,” Nelson said. “As a former educator, their appeal to our youth is greatly concerning.”

State law does not allow cigarettes to be flavored, but places no such restriction on little cigars.

The tobacco industry is expected to strongly oppose the legislation.

Are there cuts?

Rep. Denny McNamara offered a harsh criticism of Dayton’s budget proposal.

During a Monday House Ways and Means Committee meeting, McNamara told state budget chiefs that they are misleading Minnesotans by saying there are $225 million in cuts in Dayton’s budget plan.

“I would like to know how much is real, true reallocations and cuts and how much is a paper shuffle,” McNamara said, saying that what the administration is calling a cut just is the Department of Natural Resources charging other state agencies for its services. “I hope there is some real truth in it.”

Commissioner Jim Schowalter of Minnesota Management and Budget said the only large cuts are in a couple of health and human services programs.

Chamber concerned

The Minnesota Chamber of Commerce encourages members to oppose the nearly $38 billion, two-year budget plan Dayton presented a week ago.

In an email to members, the chamber says the budget proposal includes: “Huge increases in spending, huge increases in taxes, and no reform in either. End result will be harm to the Minnesota economy, competitiveness and jobs.”

The chamber says Dayton taxes and spends too much.

“The governor needs to hear from you – now!” the chamber tells members.

Rural still behind

The Dayton administration’s budget proposal does little to change differences in state funding to urban and rural schools.

“That was not achievable,” Commissioner Jim Schowalter of Minnesota Management and Budget told the House Ways and Means Committee Monday.

And when pressed if there was a plan to equalize school aid, he said: “We do not have a comprehensive strategy at this point.”

Rural lawmakers long have complained that big-city school districts receive far more money per pupil than their districts.

Tourism happy

Tourism leaders generally are pleased with Dayton’s budget proposal for their industry.

Explore Minnesota Tourism would get $16 million each of the next two years under the Dayton plan.

Tourism is an $11.9 billion industry, supporting 240,000 hospitality jobs, 11 percent of private-sector employment.

Rep. John Ward, DFL-Brainerd, said the state’s tourism budget now ranks 30th, below regional competitors such as Michigan, Wisconsin, South Dakota and Illinois.

“The tourism industry is huge in our state and our area, and we need to do what we can to help keep it growing and prosperous,” Ward said. “By investing in Explore Minnesota, we can make Minnesota a priority destination, help our tourism industry create jobs and generate new tax dollars.”

Chairwoman Lisa Paxton of the Minnesota Tourism Growth Coalition added: “Minnesota needs to invest in tourism to stay competitive, attract more out-of-state visitors and grow Minnesota’s tourism business.”

Legacy tax change

If Dayton gets his way and the state sales tax changes, a sales tax voters approved for outdoors and arts projects would automatically adjust.

Dayton wants to reduce the sales tax by 20 percent, but apply it to more goods and services. That change would affect the so-called legacy fund, but the constitutional amendment voters approved in 2008 provides for an automatic adjustment in such a case to keep revenues level.

Rep. Dean Urdahl, R-Grove City, said no new legislation should be needed to deal with the legacy tax if Dayton’s tax plan passes.

Don Davis
Don Davis has been the Forum Communications Minnesota Capitol Bureau chief since 2001, covering state government and politics for two dozen newspapers in the state. Don also blogs at Capital Chatter on Areavoices.