Octavio Solis, right, lights a cigarette before he lights another for Jennifer Maldonado Tuesday afternoon. Maldonado and Solis are among smokers dissatisfied with an upcoming $1.60 tobacco tax hike next month.
Octavio Solis, right, lights a cigarette before he lights another for Jennifer Maldonado Tuesday afternoon. Maldonado and Solis are among smokers dissatisfied with an upcoming $1.60 tobacco tax hike next month.

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Published 11:13am Wednesday, June 26, 2013

Austin residents question $1.60 hike on cigarettes

To Austin residents like Jennifer Maldonado, a $1.60 hike on cigarettes is a good enough reason to try something less expensive. Maldonado and smokers across Minnesota aren’t happy with the impending tobacco tax hike, brought about by the state legislature, which takes effect next month.

“Why not tax booze?” Maldonado said. “Why tax cigarettes?”

Tobacco sales wasn’t the only “sin tax” to come before legislators this session, but it was the one that stuck. Legislators voted to raise the tobacco tax by $1.60 as part of a $2 billion tax package, in part to raise revenue for programs sponsored by tobacco tax revenue and in part as a health initiative to encourage younger people with less income to quit smoking. Though local legislators say they didn’t support the tobacco tax — Rep. Jeanne Poppe and Sen. Dan Sparks, both DFL-Austin, called the measure a “regressive tax” that only affected a certain part of the state population — they both voted for the tax omnibus bill, which included the tobacco sales tax measure.

One local smoker wished for a better solution: If the state was going to tax tobacco as a health initiative, why not cut out the middle man?

“They should have closed the stores, so they couldn’t sell tobacco to people,” said Octavio Solis.

Maldonado has no plans to quit smoking or stop buying tobacco, however. She’s a longtime smoker, as she started smoking about a pack a day once she turned 18. She has cut back to about two to three packs a week, but her favorite brand, Marlboro 100s, run about $7.50 a pack at the Austin Walmart, and about $1 less elsewhere.

“My daddy told me I should start rolling,” she said. “He rolls his own.”

That’s likely what Maldonado will do, as she expects to save a substantial amount on cigarettes, which she smokes as a way to relieve stress. In fact, Rick Webber, owner of Reed’s Fourth Avenue store in Austin, hears the same thing from others.

“E-cigarettes have increased considerably — rolling their own, buying bulk tobacco is increasing,” Webber said.

Webber’s customers are upset, too.

“They’re disappointed in being segregated as the one that has to pay for the stadium and continually pay increased taxes,” he said.

And Webber and other gas station owners, especially those near state borders, fear the ramifications of the tax hike. Webber almost considers himself in that category, as he has heard customers say they’ll buy cigarettes in Iowa, as the new tax would drive the average price of cigarettes in his store to $7.50 per pack.

“Any border town is going to be crushed by this,” Webber said.

Furthermore, Weber worries the tax itself could hurt his profit, as last time the state raised taxes on tobacco by $0.70 he saw a decline.

“I collected an extra $100,000 for Minnesota with the increase, but I lost $10,000 in profit,” Webber said. “So now this tax is actually going to be a $1.73.”

Webber explained while the state’s mandated increase is $1.60, regular sales tax added to that will drive the increase to $1.73.

The new tobacco sales tax will go into effect July 1 and will make Minnesota the state with the highest tobacco sales tax, at $2.83 a pack. Nearby Wisconsin’s tax is at $2.52 a pack, while Iowa’s is $1.36 a pack.

 

—Matt Peterson contributed to this report.

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