Letter to Gov. Tim Pawlenty on his tax increase proposal

05/25/2005

05/25/2005
Source: Rep. Al Junhke

Today, the following letter was sent to Gov. Pawlenty from Grover Norquist, president of Americans for Tax Reform: May 25, 2005

Dear Governor Pawlenty,

I write to you urge you to rethink and withdraw your proposal for an additional 75 cent per pack tax on cigarettes that would pay for $380 million in new spending for the 2006-07 budget.

For years, you have been one of the staunchest allies of taxpayers when it came to protecting their pocketbooks.  Taxpayers have come to rely on you to “oppose and veto any and all efforts to increase taxes”, as you pledged when running for the office of governor.  And you have made good on your commitment by vetoing the gas tax increase and promising to veto the Senate’s $1.3 billion tax hike. 

With regard to the cigarette tax, taxpayers are once more relying on your leadership. There have always been attempts to disguise tax increases as user fees.  Sometimes there may be gray areas, but in this particular case, there is no question: a cigarette tax increase in the guise of a user fee fails to pass the sniff test - as does any excise tax. 

To qualify as a fee, a charge must fund a specific service, with no excess going into a general fund; the charge must be paid only by those who use that specific government service; and individuals must have the choice whether to purchase the service from government (and thus pay the fee) or to purchase the service from a private business.

The 75 cent per pack tax does not meet these criteria.

You admit the new tax revenue will free up general fund dollars to dramatically increase K-12 education spending - revealing new spending as the real motivation behind this tax increase.  A cigarette tax is clearly a tax on a specific behavior - not a user fee. Consumers pay a tax for buying a product from a private vendor, not for buying a service from the government. 

Consumers of this product pay the tax regardless of whether they use ANY government service - those with private health insurance are paying a tax to subsidize Medicaid, even though they do not use Medicaid.  And while the argument can be made that smokers do impose certain costs on society, these costs are not uncompensated. The American Medical Association estimates the societal costs of smoking to amount to 27-43 cents a pack in 2005 dollars. Yet, Minnesota smokers already are paying about $1.60 per pack in direct and indirect taxes - thus exceeding the incurred societal cost by far. 

The so-called “Health Impact Fee” clearly is a tax increase, and as such, your signing it into law would be considered a violation of the Taxpayer Protection Pledge. Furthermore, tobacco taxes are regressive, singling out mostly low-income consumers, and placing a strain on retailers, many of whom rely on cigarette sales to keep their doors open. As you have pointed out yourself, Minnesota is already one of the highest taxed states in the nation. 

You also have pointed out that you do not want to add disincentives to investments and future job growth in your state.  Yet, higher taxes would do just that. Minnesota does not have a revenue problem - the state has a spending problem. 

While taxpayers greatly appreciate your past efforts to eliminate wasteful spending and streamline the state budget, more can be done.  Other governors are now taking the lead; Gov. Mark Sanford of South Carolina has recently vetoed $96 million of wasteful spending passed by his state legislature.  Below are several examples of ways states can maintain or increase services with the same amount of revenue:

An Alabama Policy Institute study found that up to $87 million per year could be saved in Alabama simply by outsourcing three non-academic functions in schools - bus service, grounds keeping, and cafeteria service:  http://www.alabamapolicy.org/PDFs/
OutsourcingStudyM.pdf

The Ohio Legislative Service Commission concluded that exempting school construction projects only from Ohio’s prevailing wage laws would save $487.9 million over 5 years, a savings of 10.7 percent:
http://www.abc.org/user-assets/Documents/Government%20Affairs/PrevailingWageLawStudies/Ohio.pdf

A Minnesota-focused study found that simply changing the calculation of prevailing wages to conform with other states’ treatment - rather than exempting school construction - would have saved $126-$172 million in 2002, or 7.4-10% of all capital project expenditures that year: http://www.abc.org/user-assets/Documents/Government%20Affairs/IssuePages/PrevailingWage/
mn_prevailingwage_study.pdf

The Reason Foundation has identified $600 million in savings in the Colorado budget - a budget that is already more lean than Minnesota’s:  http://i2i.org/articles/IP_4_2005.pdf

Before asking families and businesses to sacrifice for an inefficient government, I urge you to take these steps to make the government less inefficient. Finally, you must realize that you are not the only official in Minnesota to sign the Taxpayer Protection Pledge; 25 Senators and 41 Representatives have also committed to oppose new taxes.  If you persist in calling for a tax increase, you put each of these 66 legislators at risk. Please reconsider, and keep your commitment to the people of Minnesota to “oppose and veto any and all efforts to increase taxes.”

Onward,

Grover G. Norquist cc: Minnesota legislators, media