Minnesota uses taxes on cigarettes to stop people smoking. What does it think taxes on labor do?
Yesterday I wrote about how policymakers frequently contradict themselves when it comes to tax.
Tax cigarettes, that’ll stop people smoking
Take cigarettes, for example. Last summer, Minnesota governor Mark Dayton decried cuts in cigarette tax rates. As MPR News reported, “Dayton argues the tax has been an effective tool in discouraging smoking, especially among young people”. Indeed, the Tax Foundation reports that Minnesota has the seventh highest cigarette taxes in the US, at $3.04 for a pack of twenty.
As MinnPost puts it,
“Keep in mind that the main goal of the tobacco tax increase in 2013 wasn’t to generate revenue, though that’s always appreciated by government; it was to encourage people to stop smoking and discourage kids from starting. Last week, the Minnesota Department of Health announced that raising taxes on tobacco products had indeed had a direct and measurable impacts:
Since the tax increase in 2013, smoking has decreased 10 percent among Minnesota adults.
Since the tax increase, 48.1 percent of Minnesota smokers report they’ve cut down on smoking, and 44.2 percent have attempted to quit.
Among smokers who successfully quit in the past year, 62.8 percent said the price increase helped them make a quit attempt, and 62.7 percent reported that it helped keep them from smoking again.
Since 2013, smoking among Minnesota 11th-graders has decreased by one-third.
Tax labor, that won’t stop people working
So, increased rates of cigarette taxation in Minnesota have, apparently, had the effect of less smoking. That was exactly the effect desired by policymakers.
So why are they so keen to tax the state’s labor so heavily? As we explained in our report The State of Minnesota’s Economy: 2017,
As a share of personal income, state-local taxes are higher in Minnesota than in all but seven other states…Minnesota is one of the 43 states to have its own income tax, but the top rate—9.850 percent on incomes over $156,911—is higher than anywhere else apart from California, Maine, and Oregon. Equally significant, perhaps, is the fact that Minnesota’s lowest income tax rate of 5.35 percent is higher than the highest tax bracket in 23 states.
Here again we see logic embraced when it chimes with policymaker’s views and disregarded when it does not. This is no way to make public policy. We increase cigarette taxes to stop people working, what do you think high tax rates on labor will do to work?
John Phelan is an economist at Center of the American Experiment.