The House tax committee debated a bill Wednesday that would prevent cigarette taxes from increasing in the future.
The legislation is sponsored by Rep. Greg Davids, R-Preston, who chairs the tax committee. His bill would put the breaks on automatic annual increases in the cigarette excise tax.
Legislators approved the automatic increases in 2013, and the first hike went into effect earlier this year.
Davids said the tax encourages cigarette smuggling across state lines.
“It seems with our tremendously high tobacco taxes in Minnesota, we are creating nefarious activities that we now seem to need to control,” Davids said.
The Department of Revenue says it needs $1 million annually for 11 new inspectors to stop smugglers. The department estimates smuggled cigarettes will cost the state $2.6 million over two years in lost tax revenue.
The group ClearWay Minnesota, which works to help people stop smoking, opposes Davids’ bill, saying higher prices go a long way in helping people stop or avoid smoking, especially younger people who are especially concerned about money.
But others, including those who own gas stations and who represent the tobacco industry, say the tax and any future increases will mean lost business and lost jobs as Minnesotans go to places like North Dakota or Wisconsin to buy cigarettes.
Davids’ bill may be considered as part of a larger tax package.