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[ INDUSTRY NEWS]
Judge overturns MN’s health “fee”
On Aug. 1, 2005, Minnesota’s cigarette excise tax increased from 48 cents to 75 cents per pack. However, on Dec. 20, a judge struck down the tax hike, saying the fee was in violation of the state’s 1998 tobacco settlement.
Called a “health-impact fee” by Gov. Tim Pawlenty, Ramsey County District Judge Michael Fetsch ordered the state to “pay refunds or give credits” to the tobacco companies for fees paid since the law took effect in August, wrote the Associated Press.
Pawlenty insisted the 75-cent-per-pack increase was actually a “fee” in order to keep his pledge not to raise taxes; however, critics are suggesting that move may have backfired.
“This is what happens when you get cute with the truth,” state Rep. Matt Entenza told the AP.
The AP wrote that under the 1998 tobacco settlement, the state “promised not to pursue future health-cost claims against the tobacco companies.” Had Pawlenty called the 75-cent-per-pack increase a tax in the first place, critics said the current problem could have been avoided.
Pawlenty said in a statement, “We are very disappointed by the court’s ruling and will ask for an immediate appeal directly to the Minnesota Supreme Court,” adding the he would also consider “using existing administrative authority to apply the fee at the retail level of sale, which is clearly allowed.”
The governor’s spokesman, Brian McClung, commented to Minnesota Public Radio that dubbing the tax a fee was Pawlenty’s idea. AP noted that McClung said there may be a way to levy the 75-cent-per-pack increase on the backs of retailers, who are not specified under the terms of the state’s tobacco settlement.
“The tobacco settlement spoke to tobacco companies and distributors; it was not a settlement related to retailers. So we’re going to look into applying the health-impact fee at the retail level and see if simply by making that administrative move, we might be able to satisfy what the judge was looking at,” said McClung.
On Jan. 23, three smokers in the state filed a class-action lawsuit alleging that the “health impact fee" is illegal and that they want a refund, reported the Associated Press.
The lawsuit asks the court to establish “a trust and a method of distributing the money to smokers” rather than funneling the money back to the tobacco companies, wrote the St. Paul Pioneer Press.
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