A Ramsey County judge yesterday struck down a 75 cent per pack "health impact fee" on cigarettes that was enacted by the Minnesota legislature earlier this year. The fee had been contested in court by Philip Morris and other cigarette companies, which argued that the health impact fee on cigarettes is a violation of Minnesota's tobacco settlement with cigarette companies, in which the state agreed not to make further claims to recover health care costs associated with cigarette use.
According to an article in the Minneapolis-St. Paul Star Tribune: "Ramsey County District Judge Michael Fetsch ruled that the fee of 75 cents per pack violated a settlement between the government and tobacco companies that barred the state from seeking additional money from the firms to pay for health care costs related to smoking. ... The health impact fee approved by the governor and the Legislature is essentially recovering costs from tobacco companies that the state was barred from doing under the settlement agreement, the judge said."
This ruling puts in jeopardy the $400 million in revenue that the state had counted on from this health impact fee in order to support the state budget. The state will apparently appeal the decision directly to the Minnesota Supreme Court. However, it is not clear that the Supreme Court will agree to review the decision since it involves the interpretation of a contract which apparently gave the Ramsey County Court final jurisdiction on contract disputes.
The Rest of the Story
The real story here is that the entire financial stability of the Minnesota government is in jeopardy right now because of the failure of the Governor and legislature to simply call a spade a spade and admit that the "health impact fee" was simply a cigarette tax whose purpose was to balance the state budget on the backs of smokers.
Had the state admitted that, there would have been no grounds for this lawsuit. There 2 primary reasons why the lawsuit was allowable:
First, because the Governor and legislature insisted on calling the revenue generator a "health impact fee" rather than a tax. There is no question that the state has the authority to raise taxes on consumer products, including cigarettes, and that nothing in the Minnesota tobacco settlement precludes the legislature from raising or lowering cigarette taxes per se.
Second, because the Governor and legislature tried to pull the wool over the eyes of the public by insisting that the purpose of the health impact fee was to reimburse the state for tobacco-related health care costs, rather than just admitting that the purpose was to balance the budget, using smokers as a politically convenient mechanism for doing so.
I argued back on July 14 that:
"What the Campaign for Tobacco-Free Kids praises as a victory for taxpayers may be a victory, but it is certainly not a victory for those taxpayers who happen to smoke. It is certainly not a victory for the lowest income citizens in Minnesota who are going to bear the burden of balancing the state budget on their shoulders. It is, however, a major victory for the wealthiest corporations and citizens of Minnesota, who are now protected from having to do their share to make up for the budget shortfall.
What just transpired in Minnesota, in my view, is nothing more than a discriminatory and regressive tax increase for some of the poorest citizens in the state, for the benefit of the wealthiest citizens and corporations. Smokers in Minnesota have been selected out to bear the full burden of financing the state programs that the legislature should be funding through other means. It is on the backs of smokers that the budget has been balanced. And the saddest part of this, for me, is that a leading "so-called" public health group has praised this strategy as a victory for Minnesota taxpayers. I certainly agree that it is indeed a victory -- for the wealthy taxpayers in Minnesota who are now off the hook. It is also a victory for corporate taxpayers.
But it is certainly not a victory for the highly addicted smokers who have now been charged with the responsibility of supporting the state's general services and balancing the budget. It is little more than a political victory for legislators who can now avoid having to lose votes from the most powerful voting block in the state - corporations and the wealthy. It is a victory that comes at the direct expense of the very population that public health practitioners should have the most compassion for - smokers.
This is not a public health measure in any way, shape or form and public health organizations have no business, in my opinion, supporting or praising such a measure. It's simply a fiscal and political maneuver."
It's quite clear, I think, that had the Governor and legislature simply admitted that this was not a public health measure, but a purely fiscal and political maneuver, the state of Minnesota would be $400 million richer right now.
I argued back on September 5 that:
"This story is a little too ironic: the entire problem arises from the Governor's and legislature's attempt to hide the fact that the 75 cent per pack "fee" on cigarettes is simply a tax. If these politicians had simply told it like it is, and admitted that the purpose of the legislation was to raise the cigarette tax in order to balance the budget, then this problem would never have occurred. Instead, they tried to disguise the tax increase as a "health impact fee," and that opened them up to this lawsuit.
The problem is that Minnesota, in the settlement of its lawsuit against the tobacco companies which sought to recover tobacco-related Medicaid health care costs paid by the state, agreed not to make further claims to recover tobacco-related health care costs. But this legislation is intended to "recover for the state health costs related to or caused by tobacco use" and allocates some of the resulting revenues to tobacco-related health care costs.
There is nothing in Minnesota's tobacco settlement which precludes it from raising cigarette taxes and the state can certainly allocate those revenues however it sees fit. And here's the irony. What would have indisputably been a legal action of the state to balance its budget by raising the cigarette tax became a potential violation of the tobacco settlement because politicians, for political reasons, wanted to disguise the fact that this was simply a cigarette tax. Their lack of forthrightness has come back to haunt them. ...
It's time that politicians and health groups alike start calling things the way they are. The supposed health impact fee is nothing other than a thinly veiled disguise: it is simply a measure to balance the budget in a way that avoids having to make difficult political choices, such as raising taxes on the wealthiest of citizens and corporations in Minnesota. Instead, the governor and legislature have picked an easy target: smokers.
But regardless of how one views the merits of the tax increase, let's call a spade a spade. To try to disguise this as a "health impact fee" is disingenous and represents little more than a political maneuver to make the tax increase seem more palatable, especially from an administration that apparently had pledged no new taxes."
That was, and remains, the "rest of the story."