How should state policymakers approach e-cigarettes?
One of the questions of economics teaches you to ask is ‘compared to what?’ Someone might tell you that a job paying $10 an hour is bad, but any reasonable…
“Incentives do make a difference”. So said Governor Mark Dayton recently, discussing what state governments can do to attract investment. And that is particularly the case in the United States, with its different jurisdictions and free travel between them. Whereas a Canadian citizen wanting to move to avoid inheritance tax would have to go to the effort of securing residence in another country, a US citizen can just cross the state line. And, as we report in The Cost of Minnesota’s Estate Tax, many do.
A stark illustration of incentives and their effects can be found in the following letter, sent to InForum by a Moorhead businessman.
When Minnesota raised tobacco taxes a few years back, I almost lost my business. With a pack of cigarettes now costing $2.86 less on the other side of the Red River, I lost a lot of customers. That’s not to mention the lower minimum wage in North Dakota.
And it wasn’t just the cigarette sales I lost. When they stopped buying cigarettes here, they also stopped buying my gas, my newspapers, my coffee and my snacks. The compounded loss caused by the last tobacco tax hike nearly did me in.
While my customers noticed the decreased hours and staffing that resulted from the last tobacco tax hike, the Minnesota Legislature apparently didn’t not. That is the only way I can explain their renewed push to put the tobacco tax back on autopilot. They did this a few years back, got cold feet, and repealed the idea before it went into full effect. Now they are kicking the tires on the idea again.
Also, the state is going after anyone who does not follow the minimum mark-up on cigarettes and is actually seeking anyone who buys large quantities of cigarettes in North Dakota and brings them across the state lines for prosecution. The below cost gas pricing law that they have is an almost exact mirror of the cigarette law, and they are not enforcing that law like the cigarette law and it has had a pronounced effect on border cities. This, along with raising the minimum wage has pushed all of us to the edge of financial ruin.
I have not worked diligently for 25 years to have them feast on the last bit of flesh that is my business and my retirement. Between lottery taxes, gas taxes, wage taxes, health care, property and income tax increases in the last 15 years, it’s a wonder that we’ve made it this far. And don’t forget the Great recession of 2008 right in the middle. It’s time for sensible tax legislation and reduced spending, along with enforcing the laws properly so that everyone has a fair shake.
With all that is going on in this state right now, the last thing these legislators should be doing is debating an effort to repeal the repeal of the tobacco tax autopilot provision.
Brady Olson is the owner of Brady’s Service Center in Moorhead.
People will cross the state line if their estate taxes are too high or if their cigarette taxes are too high. Incentives do make a difference.
John Phelan is an economist at Center of the American Experiment.