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Mark Dayton Turns To Cigarette Tax

Gov. Mark Dayton offered to give up his demand for an income tax hike on the rich if Republicans agree to a $1-per-pack cigarette tax increase — and pointed to former Gov. Tim Pawlenty’s support of a similar hike as support for his plan.

But with Republican legislative leaders emerging from just a 24-minute afternoon negotiating session in Dayton’s office reiterating their opposition to any tax increase, a deal seemed much further away Wednesday afternoon than at any time since the state government shutdown began six days ago. Both sides’ post-meeting press conferences were full of recriminations as the governor and legislative leaders essentially blamed each other for bargaining in bad faith.

Dayton said he would prefer a temporary 2 percent surcharge on people earning more than $1 million per year, which he estimated would generate an estimated $520 million. In his telling, Pawlenty partly inspired his call for the cigarette tax option because his support of one helped end the 2005 shutdown.

“Governor Pawlenty even agreed to a cigarette tax increase,” Dayton told reporters in the state capitol here. “So there’s precedent for that as well.”

He mocked Pawlenty for calling it a “user fee” instead of a tax, noting that it was “otherwise named” in 2005.

“After the income tax, there aren’t any good taxes in my book,” Dayton said, insisting that $1.4 billion in additional revenue is needed to close the last of the state’s $5 billion deficit.

Republican leaders swiftly rejected the proposed tax increases. Speaker of the House Kurt Zellers called the offer “a disappointing step backward.”

“We’ve made it clear we do not need a tax increase to balance our budget,” he said. “I would say a tax increase in general is a non-starter.”

Dayton expressed surprise about the visceral response of Republicans to his new plan.

Republicans quickly circulated a Dayton quote from last fall’s governor’s race when he criticized a proposal by third-party candidate Tom Horner to raise the cigarette tax by $1.50-per-pack.

“You raise the price of a pack of buy cigarette online $1.50 as Mr. Horner proposed, that’s money out of the pockets of working people and poorer people, and that means kids don’t have as much to eat or don’t have the same quality of food,” Dayton said then. “Those are addictions, and I think you treat addictions as addictions and you don’t penalize the people who are dealing with them economically.”

The governor complained Wednesday that Republicans would like to use bonds to borrow against future payments from a cheap cigarette online settlement to close the gap instead of addressing the problem head on now.

“It’s their way or no way, that continues to be their position,” Dayton said. “If somebody has a rabbit to pull out of their hat, then I look forward to them doing so. But there are only so many real world ways of making up this difference.”

There was some progress. Health care has been one of the big hold ups, and Senate Majority Leader Amy Koch said that a meeting between Republican committee chairs and the state director of the health and human services department earlier in the day was productive.

The two Republicans will meet with Dayton again on Thursday morning to talk about K-12 education spending. They’ve agreed on the total amount that should be spent, but they disagree on how it should be spent.

Both of Dayton’s proposed plans released Wednesday would delay hundreds of millions of dollars in state payments to local school districts to help fill the remaining budget gap.


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