Governor Mark Dayton
130 State Capitol
75 Rev. Dr. Martin Luther King Jr. Blvd.
St. Paul, MN 55155
Governor Dayton:
On behalf of National Taxpayers Union’s 362,000 members, over 7,000 of whom reside in Minnesota, I urge you to not raise taxes in your forthcoming biennial budget blueprint. Though the $1.1 billion deficit certainly poses a serious challenge for lawmakers, I hope you will consider the harmful effects tax increases would have on Minnesotans. Two possible proposals are particularly troubling: higher taxes on income, which would endanger economic growth and job creation; and tobacco tax hikes, which would impose disproportionately higher economic burdens on low-income residents.
Minnesota’s top income tax rate of 7.57 percent is already one of the highest in the region, thus putting the state at a disadvantage when it comes to attracting new businesses and high-income earners. Indeed, many Governors in the Midwest and across the nation are seeking to lower and even eliminate state income taxes to spur growth. Moving in the exact opposite direction could prove extremely damaging to the Minnesota economy.
Additionally, a tobacco tax increase could further harm those Minnesotans who have already suffered greatly because of the sluggish economy. As you well know, tobacco taxes are inherently regressive. I urge you to stand by your comments of 2010 when you stated, “You raise the price of a pack of cigarettes $1.50… that’s money out of the pockets of working people and poorer people, and that means kids don’t have as much to eat or don’t have the same quality of food.”
While tobacco taxes are a frequent target for policymakers looking to close budget deficits, most tobacco tax hikes have failed to produce the expected revenue. New Jersey reported a $52 million shortfall in tobacco tax revenues after it raised its cigarette tax by 17.5 cents in 2006. Subsequent to boosting its cigarette tax by 50 cents in 2009, the District of Columbia reported that it collected $15 million less than expected, and $7.6 million less than it collected prior to the tax hike. Other states, including Arkansas, Maryland, Mississippi, and Rhode Island, have also reported gaps in revenue collections following tobacco tax hikes.
I wish you and your colleagues in the Legislature all the best as you tackle difficult issues confronting the State. Our members hope you will chart a course that avoids higher taxes.
Regards,
Brandon Arnold
Vice President of Government Affairs