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Dayton hears about smoking border battle

MOORHEAD — Frank Orton made sure Minnesota Gov. Mark Dayton understands problems he faces in competing against North Dakota stores.

“Minnesota must not adopt a tax policy that makes our businesses unable to compete,” Orton wrote in a letter to Dayton in connection with a Monday night Moorhead town hall meeting. “At times those of us on the Minnesota-North Dakota (line) feel like we are playing with the deck completely stacked against us. At some point the economics will be as such that we just quit playing the game.”

Orton, followed by Dale Erickson of Henry’s Foods in Alexandria, said a Dayton cigarette tax increase proposal threatens border city stores. Orton said the smokers will go to Fargo and buy not only their cigarettes, but drinks, food and car washes.

“Minnesotans could drive across the bridge to Fargo and buy their cigarettes for $18 less per carton,” Erickson warned Dayton.

Erickson and Orton were among the few who challenged Dayton’s proposals. They mostly were critical of taxes that place Minnesotans at a disadvantage to lower-tax North Dakota.

Orton said many of the 15 northern Minnesota convenience stores he owns would be hurt if Dayton gets his way and Minnesota cigarette taxes go up. The two he owns on the North Dakota border compete with stores just inside North Dakota that charge 79 cents less tax per pack.

Other stores in the Walker area, near the Leech Lake Indian Reservation, face stores on the reservation that sell Seneca cigarettes with no local taxes, he said, “them giving them an enormous pricing advantage.”

Minnesota charges $1.23 a pack tax and Dayton said he proposed raising it 94 cents because of the health benefits. Supporters say it would help reduce smoking, and thus reduce health care costs the state pays.

Erickson, whose business employees 185 people, said Interstate 94 “will become a black market highway” as cigarettes taxed at a lower North Dakota rate come to Minnesota. “There is no way to trace the cigarettes.”

Dayton promised if the black market is a problem, he will make sure state officials crack down.

Most voices at Dayton’s town hall meeting at Minnesota State Community and Technical College campus supported his initiatives.

His budget and outlines presented by Senate and House Democrats, who control the Legislature, call for spending about $38 billion in the next two years.

They would raise taxes more than $2 billion to finance the budget, although legislators’ plans do not detail how they would increase taxes.

Dayton wants to increase income taxes for individuals with $150,000 in annual taxable income and $250,000 for couples.

He also would raise the tobacco tax, but dropped his proposal to add the sales tax to most services.

Just one person questioned the Dayton income tax increase.

Dayton already has met with the public in Duluth and plans a 6 p.m. meeting tonight at St. Cloud City Hall as well as one in Rochester next week.

In Moorhead, several of the 135 people attending praised Dayton for his work on education.

“I want to thank you for your support of education in general,” said Clyde Allen, a University of Minnesota regent and former state finance commissioner.

He especially thanked Dayton for supporting the university’s effort to stabilize tuition.

Dayton pointed out he has managed to increase education funding despite budget deficits.

The governor said 65,000 Minnesota jobs are not filled because people do not have education that businesses need.

A college student complained a higher minimum wage Dayton supports could drive restaurants to Fargo.

“I think the minimum wage should be set so someone working full time can support a family of four at the poverty level and achieve the American dream,” Dayton responded.

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.