LRC Memo on Tobacco Tax Reminds Voters Legislature Doesn’t Respect Initiative Fund Dedications

When you are Speaker of the House, you still get to circulate initiative petitions to put measures to a public vote. But unlike other petitioners, you also get to chair the Legislature’s Executive Board and direct the Legislative Research Council to spend taxpayer dollars researching your issue for you.

On today’s Executive Board agenda is an LRC draft issue memorandum on cigarette and tobacco taxation. The LRC analysis, prepared by senior research analyst Amanda Jacobs and submitted November 9, offers a variety of facts keenly pertinent to the vo-tech tobacco tax initiative petition submitted by Speaker and E-Board chair G. Mark Mickelson on November 6.

Now before I get all hot at G. Mark, I should point out that the Executive Board motion directing LRC to create this issue memo and six others came from Senator Billie Sutton, was seconded by Representative Tim Reed, and was approved unanimously by the Executive Board, including Chairman Mickelson, at the E-Board’s May 15 meeting. But it occurs to me that Melissa Mentele, Joe Kirby, De Knudson, Rick Weiland, Drey Samuelson, and other advocates of direct democracy would surely enjoy the opportunity to sit on a committee with 14 other legislators and gently persuade them, with gavel in hand, to direct state resources toward research on topics they are trying to put to a public vote.

There. That’s off my chest. Let’s talk about what the LRC tells us about South Dakota’s tobacco taxes.

South Dakota currently taxes cigarettes at $1.53 per 20-smoke pack. The last increase came from us, the voters, who approved a buck-a-pack hike in 2006 that immediately produced more revenue and less smoking. However, since Fiscal Year 2008, tax revenues on cigarettes and other tobacco products, along with a few dollars from cigarette licenses, have declined 9%, from $62.4 million to $56.8 million.

It’s worth noting that when voters approved the tobacco tax hike in 2006, they dedicated that money to education, health care, and property tax relief. The LRC issue memo notes that the Legislature has repealed those earmarks and dumps nearly all of that tobacco money into the general fund—i.e., uses it for whatever they want instead of what we voters wanted. Mickelson’s initiative promises to spend its additional revenue on vo-tech education… to which voters may justifiably say, “Yeah, we’ve heard that one before.”

Our $1.53 is the third-highest cigarette tax among adjoining states (Minnesota leads, charging $3.04; North Dakota lags at $0.44). We are the national median tobacco taxer. Mickelson’s vo-tech tobacco tax would add another dollar to every 20-cigarette pack, bringing us to $2.53 a pack. Mickelson’s initiative would boost us to the eleventh-highest tobacco tax in the nation, just past Wisconsin’s $2.52 but still behind Pennsylvania’s $2.60. The highest per-pack taxes in the nation are in New York ($4.35), Connecticut ($3.90), and Rhode Island ($3.75).

LRC notes that tobacco distribution licenses go for a mere $150 per year. That fee hasn’t changed since 1966. Minnesota cigarette distributors pay a $300 fee; New York’s $1,500 fee is the highest in the nation. Mickelson’s initiative does not change that license fee… because if Speaker G. Mark Mickelson is going to raise taxes to boost the job training programs that his business pals want, he sure as heck isn’t going to raise taxes directly on those business pals.

The LRC draft issue memo on South Dakota’s tobacco tax is an informative read. How nice it would be if we could get the LRC to produce such issue memos for every initiative that heads to the ballot in 2018.

9 Responses to LRC Memo on Tobacco Tax Reminds Voters Legislature Doesn’t Respect Initiative Fund Dedications

  1. Well that’s an easy one, raise the dang tobacco license fees.

  2. Let’s see… no increase since 1966. Raise the price by inflation each year, figure about 2% this year… 2018 license fee could reasonably be set at $1,133. Of course, even that hefty hike would only raise the total from license fees from $12,975 to $98,041, $85K in new revenue. But every penny helps!

  3. Or what if we didn’t make this a problem that needs to be solved with tobacco money?

    Every time I see another tax or restriction on smokers, I feel like it is the result of some person who has a subjective problem with smoking or smokers and wants to stick it to them for their audacity to do something that the person doesn’t like or agree with. Smokers are like an ugly minority that nobody wants to protect for fear of being lumped in with “them.” What about smokers’ rights? Yeah, nobody cares because it isn’t socially hip to stand up for them.

    Why tax the smoker and the stores that sell smokes drastically more than those who are tobacco free?

    “Because I don’t smoke. Because smokers are different. Because I don’t like what they do. Because I don’t want my kid to smoke. Because we can. Because nobody will fight us on this. Because smokers are an unpopular sector of the population. Because I am a bully and I feel like I should be able to make others feel bad about their choices if those choices are different than mine.”

    Instead of trying to take more money out of smoker’s pockets, what if we taxed drive-through coffee like we tax a pack of smokes? Starbucks and Scooters are making billions of dollars in profit shoving unhealthy levels of caffeine and sugar down our throats at unprecedented rates. It is affecting the health of the population. Let’s mark up these $5 cups of coffee to $7.50 to pay for some unrelated pet project of mine, what do you say?

    Or how about cosmetics? Let’s just add a buck or two tax to all cosmetics. Nobody “needs” them. They are harmful to animals, humans, and nature in general, so let these horrible people who use cosmetics pay the college tuition bills for complete strangers.

    Of course, those sound like stupid ideas. Just like sticking college expenses on smokers. People use “public health” concerns and expenses as the basis for their anti-smoking baloney, but there are many other public health concerns that are ignored. It’s because the health issue is a ruse. They don’t want to tax tobacco for the policy reasons they are saying. That is lip service. They want to tax tobacco because they don’t like people who like tobacco.

  4. What Ryan said. And what Cory said. Any revenue Mickelson’s proposed tax increase would raise would go into the general fund and soon enough be used as replacement money for tech schools rather than as new money. Fool me once, shame on you. Fool me twice, shame on me. Fool me over and over, call me a South Dakota voter.

  5. You forgot to add SD notorious food tax to your rant, Ryan. Man I wish you would get that ticked about SDs food tax which is amongst the highest in the nation.

    Come on Ryan, bring on the food tax rant!

  6. Everyone eats food – I’m not opposed to fair taxation.

    On a side note, I do notice that many of my comments are much longer than the average comment on this blog, but it is not something I do intentionally. I wish I was witty and succinct enough for brevity. So most of my comments look like rants, but they aren’t intended to be, I am just apparently unable to whittle my thoughts.

  7. Ryan, if you can show me externalities from coffee and cosmetics that equal the public health harms done by tobacco, I’m all for the tax you recommend.

  8. Why does tobacco have to be the benchmark to compare other harms against? I think everyone can admit that tobacco is not healthy, but it sure seems like it is shouldering much more than its fair share of the tax-related punishments that are being doled out to things that are not healthy.

    People cry about the health effects of smoking while they stuff 99 cent double bacon cheeseburgers, large fries, and gallons of soda down their chubby little kids’ throats. Bunch of hypocrites.

  9. Tobacco is a good benchmark because we have a lot of empirical research showing those harms and because we have an established history of tax increases and public health efforts reducing smoking and increasing public health.

    I see no threat to public health from longer comments and will never propose a per-word tax. Carry on.