The North Dakota House of Representatives has rejected a bill to raise taxes on tobacco from $0.44 per pack to $1.54 per pack.
Rep. Vicky Steiner (R-Dickinson) says she couldn’t support the bill because it was a regressive tax, hurting low-income individuals more than those with higher incomes.
“We cannot justify a tax increase when there is such a big loser on the other side of the column,” she said.
‘We Take Pride in Low Taxes’
Steiner also says a legislature should not try to mold individuals’ personal lifestyle choices.
“You have people who overeat,” Steiner said. “Should candy bars have a high tax? We take pride in low taxes. We believe in personal responsibility. For us to raise a tax is a pretty heavy lift in North Dakota.”
Michael LaFaive, director of the Morey Fiscal Policy Initiative at the Mackinac Center for Public Policy, says lawmakers and activists typically give two reasons for high cigarette taxes.
“They are viewed as a sinful product,” LaFaive said. “By taxing them, lawmakers hope to thwart smoking and improve public health.
“They are also taxed to raise revenue, but people very much want this legal product,” he added. “They are willing to pay to get it, even if the tradeoff is [to forego] better food and housing.”
‘An Ugly Consequence’
If the bill had passed, more people would have started smuggling cigarettes into North Dakota from other states, LaFaive said.
LaFaive’s most recent research shows for every 100 cigarettes consumed in North Dakota, an additional three are smuggled out in cross-border transactions. Raising taxes on cigarettes would reverse that trend, causing an additional 14 cigarettes to be smuggled into North Dakota for every 100 legal ones sold, he says.
LaFaive said the bill would thus have created more criminal activity in the state.
“Lawmakers did the right thing,” LaFaive said. “Cigarette smuggling and other unintended consequences are an ugly consequence of high excise taxes.”
Paul Blair, state government affairs manager at Americans for Tax Reform, said another important aspect of the House vote was that it made North Dakota the first state to define e-cigarettes as a non-tobacco product, meaning e-cigarettes will not be subject to high taxation commonly applied to tobacco products.
Protecting Harm-Reduction Products
Blair says studies show e-cigarettes help tobacco users kick the habit.
“These products are saving peoples’ lives,” Blair said. “It doesn’t make sense to victimize them with taxes and regulation. You do not treat the products that save lives as sinful behavior.”
Defining e-cigarettes as a tobacco product allows lawmakers to tax e-cigarettes at a much higher rate without explicitly imposing a new tax or tax hike.
Blair says this motivation has “really exposed the fraud of the so-called public-health industry.”
Tom Gantert ([email protected]) is the Mackinac Center for Public Policy’s senior news correspondent.