Gov. Messinger‘s Dayton’s Budget: One Dry Well After Another

A few months back, those of us who figured Zygi Wilf should pay for his own real estate improvements rather than plunder the state treasury were vindicated when turned out that the “mechanism” (read: gimmick) the state planned to use for its share – “electronic pull tabs” – wasn’t going to deliver anywhere near the planned revenue.  If things didn’t turn around fast (note: they will not), the state’s “contribution” to Zygi Wilf’s investment the Vikings stadium will have to be paid for by all of us taxpaying ripe sucks out of the general fund.

That’s bad enough – and it’s just to cover a putatively fixed bill.

Now, Governor Messinger Dayton has started coming out with budget proposals.  And along with some of those proposals (although, notably, not the one to repay part of the education budget “shift”) come some “mechanisms” to pay for them.  Gimmicks, if you will.

Minnesotans, being virtuous in a passive-aggressive sort of way, love “sin taxes”; tobacco is a common public policy kick toy in this state.  And Messinger Dayton intends to jack up the price of cigarettes by 94 cents a pack.

It’s not going to work, of course.

For starters:  cigarette taxes never, ever deliver the kind of revenue that their proponents expect.

Despite fanciful claims to the contrary, many tobacco tax hikes across the country have failed to produce the promised revenue. In 2009, Washington, D.C. raised its cigarette tax from $2.00 to $2.50 per pack. The District projected the new tax would generate $45 million in revenue, about 20 percent above 2009 levels. Instead, revenues came in $12 million below projections and $4.2 million lower than before the tax was imposed. Similarly, New Jersey reported a $52 million shortfall in tobacco tax revenues after it raised its cigarette tax by 17.5 cents in 2007.

The reason for this?  Addiction notwithstanding, cigarette smokers are people – and people alter their behavior to avoid paying taxes on discretionary things like smoking.  If a tax increase jacks up the price of a pack of smokes by 10%, then all other things being equal, people cut their spending.

“Yay!” say the tax’s proponents.  ”10% of people quit smoking!  Or they smoke 10% less!”.  Some do.  Others switch to cheaper cigarettes, or buy from the black market that always, inevitably burgeons whenever government cracks down on something people want; at any rate, people avoid paying the tax as best they can.  It’s Econ 101.

(Indeed, the public health benefits of taxing smoking seem to have stalled over the past twenty years)

But government can’t seem to avoid the spending that was to be based on all that tobacco money, and goodness knows no DFL administration would ever roll back an expenditure that we can’t afford.  Which means:

Due to these declining revenues, states often turn to broad-based tax increases to pay for an overspending problem. A recent NTU study also showed that 41 of 59 state tobacco tax increases from 2001-2006 were followed by more expansive tax increases within two years, as states attempted to make up for tobacco revenue that never appeared.

Just like the Vikings stadium; they’ll be after us to fill in the shortfall.

Oh, yeah – and for all of Governor Messinger’s Dayton’s palaver about making the rich pay their “fair share”, it’s worth noting that the cigarette tax is the most regressive tax of all – according to that noted conservative tool, Governor Mark Messinger Dayton.

Why, if I didn’t know better, I’d assume the Governor‘s ex wife was just saying things to get elected…

Gary Gross has also been covering this.

12 thoughts on “Gov. Messinger‘s Dayton’s Budget: One Dry Well After Another

  1. This is something I’ve wondered about regarding our “speak truth to power” media culture.
    In all the years I’ve been observing it, ‘sin’ taxes on alcohol and cigarettes as well as special taxes on ‘millionaires’ never bring in the money their proponents say they will. In fact, they often bring in less than they were getting from the previous tax scheme. Yet I have never seen a Narrative Coordinator note that these taxes never raise the revenue the proponents claim they will based on history or evidence. And no Coordinator dare ask what’s going to be different this time for fear of losing ‘access’.

  2. They’ll get the money from the poor and working class.
    The numbers were hard to find, but it looks like the fiscal cliff deal gets the feds 75 billion a year in revenue, 55 billion from people making more than $400k/year, and 20 billion on taxing working people (expiration of the payroll tax holiday).
    A family earning $56k/year saw its taxes go up by about $1100/year.

  3. The average American, by the way, pays a $1061/month mortgage payment.
    Way to stick it to the rich, Dems!

  4. It’s not important that the program won’t work. These are democrats, folks. What is important is the illusion of solving a problem. They can massage the numbers through their friends in the press. Look at light rail ridership numbers!

  5. You think the lower taxes, greater economic growth, lower unemployment rate and the ability to choose your own doctor you had under Bush was better than what we’ve got under Obama? Pal, you just don’t know what good governance is! Obama’s going to see to it that you get good governance until your ***hole bleeds!

  6. Others switch to cheaper cigarettes, or buy from the black market…

    Or, like my addicted inlaws, they go on the Indian reservations to buy their smokes at prices less than the NY state tax. It’s getting so tough to sell name brand cigs Upstate that Big Tobacco is trying to get NY to try going after the Indians, but that’s a tough sell for many reasons.

    BTW, NY couldn’t go after the Indians for their tax, so they went after the wholesalers selling them the cigs. The Indians then responded by going into the manufacturing business. Nice to see someone in this country still has the entrepreneurial spirit.

  7. “The Indians then responded by going into the manufacturing business. Nice to see someone in this country still has the entrepreneurial spirit.”

    Don’t ya’ just love it when the best laid plans of economically illiterate idiots get derailed by people that actually think?

  8. From the article quoted:

    “We tried poverty for 200 years,” the Oneidas’ leader, Ray Halbritter, said in an interview. “We decided to try something different.”

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