No, smokers are NOT paying for the new Vikings stadium

There’s a persistent myth growing this summer: that the new $1.60 per pack cigarette tax that went into effect July 1 is going — at least in part — to pay for the new Vikings stadium.

A Minnesota tax stamp on a pack of cigarettes. (MPR Photo/Tim Nelson)

Here’s a small sample of the Twitterati perspective:

Cigarette taxes did go up. And there is a tenuous connection to the new home for the Vikings. But smokers paying the mortgage on the Vikings stadium?

“That’s not true,” says state revenue commissioner Myron Frans.

In fact, there might never be any cigarette tax money going into the Vikings stadium if the financing works as planned.

So what gives?

Here’s how it works. Last year, the state approved an expansion of gambling to pay its $348 million share of the new Vikings stadium. Gambling taxes were going to pay back stadium bonds. Trouble is, electronic pulltabs are coming in WAY below projections.

So the state had to come up with a fix, before it sold those bonds this year. The Dayton administration opted for a two-part solution.

The biggest part of that was a “unitary tax” that would apply regular Minnesota corporate taxes to more out-of-state companies than pay corporate taxes now. The Dayton administration said closing what it called a loophole would raise about $20 million a year. That and about $10 million in taxes on the electronic pulltabs that DID get sold, should be enough to cover the debt payments on the state’s stadium bonds, if the number crunchers are right.

That’s the first part.

The second part is where the cigarettes come in. The new tobacco taxes took effect on July 1,but sellers and suppliers already had lots of unsold inventory in stock, and those cigaretts had been charged the old, smaller tax. That left sellers the opportunity to either offer smokes at the new price and pocket the tax difference, or start a “smoke rush” and sell cigarettes at a discount even after the new, additional $1.60 tax took effect. So state tax authorities instituted a one-time “floor tax” that made the cigarette taxes retroactive to what suppliers literally had on their warehouse or store floors.

Frans, the revenue commissioner, says the state expects to collect about $30.5 million for that floor tax and will earmark $26.5 million, just one time to the Vikings stadium project. After that one-time “catch up” tax, cigarette taxes will be going where they usually do — to the state and not the stadium.

And there’s more. That one-time cigarette tax is only going to a “reserve fund.” It’s a rainy-day account, of sorts, that’s intended to assure bond buyers that their money isn’t at risk. If the state’s calculations are correct, that money will never need to be spent on the stadium, because the other taxes will pay the debt service.

“We don’t think we’ll need them,” Frans says of those floor tax dollars that went into the reserve fund.

They’re in the state’s bank account just in case there are any funding problems over the 30-year life of the bonds. That $26.5 million is also a pittance compared to the $348 million in principal and tens of millions more in interest and financing costs the rest of the state will be paying for the stadium.

So smokers AREN’T paying the mortgage on the Vikings stadium — their cigarette taxes are just easier to understand than the unitary tax.

  • John Peschken

    The notion that this dollar is for this and not for that is kind of silly. Dollars go in, dollars go out. No one really knows which dollar went to what. Allocating tax revenue to something in particular is more illusion than reality. Money is fungible. Do you know which dollars you earned went to the groceries you bought on Saturday?

  • John Peschken

    The notion that this dollar is for this and not for that is kind of silly. Dollars go in, dollars go out. No one really knows which dollar went to what. Allocating tax revenue to something in particular is more illusion than reality. Money is fungible. Do you know which dollars you earned went to the groceries you bought on Saturday?

  • Mark

    So smokers aren’t paying more for the stadium… instead all of that money goes to pay for schools and other things that should be everyone’s responsibility. How can it be that these ‘sin’ taxes don’t violate MN’s anti-bullying laws?

  • Mark

    So smokers aren’t paying more for the stadium… instead all of that money goes to pay for schools and other things that should be everyone’s responsibility. How can it be that these ‘sin’ taxes don’t violate MN’s anti-bullying laws?

  • Walter

    Well, John, yes I do know what dollars when to the groceries on saturday. “My” dollars. I don’t smoke, but the stadium funding situation is complete bullshit. Ticket sales from the patrons who chose to use the stadium, should fund the stadium. Not people who could give a crap less about football or the additional revenues it will generate.

  • Walter

    Well, John, yes I do know what dollars when to the groceries on saturday. “My” dollars. I don’t smoke, but the stadium funding situation is complete bullshit. Ticket sales from the patrons who chose to use the stadium, should fund the stadium. Not people who could give a crap less about football or the additional revenues it will generate.

  • KW

    Quite the “rationalization. If the “State” is paying for a share of the Vikings stadium and the new cigarette tax is “going to the State” then no matter how you slice it and dice it, the cigarette tax will find it’s way to the new stadium. In addition, you say the initial cigarette “floor tax” of $26+ Million is going to the new stadium but then try to tell us none of it is?? You certainly are not naive enough to believe that the so called “reserve fund” will not eventually get to the stadium are you? Electronic pulltabs are a bigger “bust” than Troy Williamson. To think, and then report that none of the new cigarette tax is going to help pay for the new stadium is foolhardy, naive and wreckless journalism to say the least.

  • KW

    Quite the “rationalization. If the “State” is paying for a share of the Vikings stadium and the new cigarette tax is “going to the State” then no matter how you slice it and dice it, the cigarette tax will find it’s way to the new stadium. In addition, you say the initial cigarette “floor tax” of $26+ Million is going to the new stadium but then try to tell us none of it is?? You certainly are not naive enough to believe that the so called “reserve fund” will not eventually get to the stadium are you? Electronic pulltabs are a bigger “bust” than Troy Williamson. To think, and then report that none of the new cigarette tax is going to help pay for the new stadium is foolhardy, naive and wreckless journalism to say the least.

  • Mark Lyman

    there all a bunch of Obama bangers their just as bad as the federal Government…. they all need to go….

    • Ken Shalek

      All the Latent Homo Republicans too

  • It’s Over

    I’m just relieved that with the tax on cigs and internet purchases the DFL finally got the 1% to contribute their fair share. Next session maybe go for surcharge on pop, snacks, meat, cheese…you know, rich people food. I give up, you win.

  • It’s Over

    I’m just relieved that with the tax on cigs and internet purchases the DFL finally got the 1% to contribute their fair share. Next session maybe go for surcharge on pop, snacks, meat, cheese…you know, rich people food. I give up, you win.

  • bejesus

    I don’t believe a word that comes out of the Commissioner of Revenues mouth…

  • bejesus

    I don’t believe a word that comes out of the Commissioner of Revenues mouth…

  • rarinmn

    So in other words the raising of the cigarette tax at the same time the Governor was getting intense pressure to respond to the stadium financing crisis brought on by the epulltab mirage was just a coincidence? Thinking anyone will believe that is about as absurd as planning on epulltabs to fund this in the first place.

    This was nothing more than a simple multimillion dollar case of bait and switch perpetrated on a trusting public who were deceived by their Governor and legislators. There was no epulltab history on which to base any projections. There were no pilot programs. There were no experts brought in to validate the plan. It was sold to the public as a no-cost way to pay for the stadium. And now, as has always been the case with these kind of scams, the plea by the scammers is that it’s too late and we have to find other sources of funds.

    And people wonder why politicians are held in such low regard.

    • Markenheimer

      That’s pretty much the way I see it. Dayton and his bag man, Mr. Fran, used some of the most obfuscatory language I’ve seen in concocting the quotes in this article. And that’s saying something after following Obama and Holder for five years.

  • rarinmn

    So in other words the raising of the cigarette tax at the same time the Governor was getting intense pressure to respond to the stadium financing crisis brought on by the epulltab mirage was just a coincidence? Thinking anyone will believe that is about as absurd as planning on epulltabs to fund this in the first place.

    This was nothing more than a simple multimillion dollar case of bait and switch perpetrated on a trusting public who were deceived by their Governor and legislators. There was no epulltab history on which to base any projections. There were no pilot programs. There were no experts brought in to validate the plan. It was sold to the public as a no-cost way to pay for the stadium. And now, as has always been the case with these kind of scams, the plea by the scammers is that it’s too late and we have to find other sources of funds.

    And people wonder why politicians are held in such low regard.

    • Markenheimer

      That’s pretty much the way I see it. Dayton and his bag man, Mr. Fran, used some of the most obfuscatory language I’ve seen in concocting the quotes in this article. And that’s saying something after following Obama and Holder for five years.

  • Al

    Myron Frans has been duly added to the dishonest bureaucrat list …..and along with him is the journalist in this case (Tim Nelson) for being Dayton’s and Frans’ stooge. I don’t smoke cigarettes but it’s damn clear that the cigarette tax was put into place to stabilize the poorly thought out deal that Dayton (and perhaps Frans) got us into. Shame on all of them.

  • ash

    Really what a propaganda article. This is obviously going to the stadium. Only a one-time tax catch up is going to the stadium is B.S. There initial plan was ill thought out so then they tax us more to cover it plain and simple. Our Government is inept and poor stewards of our money.

  • farlee30

    Just find it funny that one group of people are the only ones getting taxed. I guess in my book that discrimination, because if it was fair taxing, everyone would be paying the tax to fund the stadium what bs.

  • Ken Shalek

    All the Latent Homo Republicans too