When Minnesota lawmakers implemented state health impact taxes four years ago in 2005, which saw cigarettes prices jump by 75 cents per pack and prices for other tobacco products, including pipe tobacco, cigars, and smokeless tobacco went up by 35 percent as well, sales of tobacco products experienced a dramatic 30-percent decline across the state. Thirty tobacco shops only in the Minneapolis-St Paul metro area alone and  a tobacco wholesaler based in Bloomington, counting 100 years of successful work experience all were forced to get out of business. Hundreds of innocent people were fired and left without a source of the livelihood.

During the following four years, Minnesota cigarette retailers have failed to completely recover from that kick, and now they are frustrated to hear about another kick, this time even harder. Two bills submitted to the Minnesota House of Representatives simply shocked smokers and retailers by their outrage, since one of these bills proposes to increase state taxes on cigarettes by as much as $1 per pack (making it $10 per carton). According to the other bill, the state taxes on cigars, pipe and smokeless tobacco would be doubled.

Smokers and sellers were simply destroyed about the proposals because they came on the heels of the federal tax increase. That would enter into the history of modern economics as the largest-ever tax imposed on a single group of products. 

By imposing enormous $1 state tax per pack of cigarettes and other tobacco-containing products, the Minnesota State Government will contribute to estimated 25-percent drop in the sales of these products. Although, the State Treasury already generates almost $500 million annually only in taxes, it seems to be not enough for several lawmakers.  

According to industry analysts, Minnesota is likely to repeat the fate of New Jersey in case the state cigarette tax is increased by $1 per pack to a new record of $2.23 for a pack.

When New Jersey Assembly approved the bill to increase cigarette tax to a total of $2.575 per pack back in 2007, the total revenue collected the next fiscal year from cigarette taxes was almost $23 million lower less than the total revenue before the tax increase. And now, Minnesota cigarette tax of $2.23 per pack is coming dangerously close to the corresponding New Jersey tax.
Besides, the inevitable loss of revenue, the dramatic sales drop of more than 30 percent would see as many as 3,200 of the total number of 32,000 Minnesota residents who are employed by local wholesalers, retailers, convenience stores, specialized tobacco stores and gas stations would be fired for sure. In addition, several family-owned stores and wholesale companies would be obliged to get out of business. 

Various health organizations will praise the tax increase claiming that higher prices on cigarette and other tobacco products would make certainly force many people to give up smoking. And it was proven by the previous cigarette price increase that cost is the major factor influencing on smokers’ decision. Therefore, a hike of as much as $1 per pack of cigarettes and doubling of the prices on other tobacco products will make the majority of Minnesota smokers to order their smokes from overseas online shops or visit tax-free Indian shops to evade enormous state taxes. They also can cross the state line to stock up for their cigarettes in neighboring states and thus, exaggerating already difficult situation of significant drop in sales and lower state revenues.   

Just look at the following table in order to understand why local smokers are likely to resort to other places for their cigarettes instead of buying them at local stores:

• Online stores: tax-free (an average of $22 in savings per carton);
• North Dakota: $1.45per pack
• South Dakota: $2.54 per pack
• Iowa: $2.37 per pack.

Having assessed all the possible consequences, Minnesota cigarette retailers are reasonably outraged. Every person would be upset if somebody would take his business leaving him jobless without livelihood. It is simply dishonest from the government to approve the tax that would let to cutting up to 3,200 in times of economic downfall. Politicians have to take care about those people. Who had voted for them and now depends on their will rather than approving devastating tax hikes.