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Tobacco

Two States Face Big Tobacco Tax Increases

NATO urges retailers to oppose Montana, South Dakota ballot questions

LAKEVILLE, Minn. – On Nov. 6, Election Day, a question will appear on the Montana and South Dakota ballots asking voters to vote in favor of or against large cigarette and tobacco tax increases. Retailers with stores in either state should join the effort to defeat these tax increases and urge their customers to vote “No” on the respective ballot questions. To receive point-of-sale information to educate customers about the ballot questions, retailers should email Jim Duke of Altria Client Services LLC, Richmond, Va., at [email protected]

Montana I-185: The Montana ballot question, known as I-185, would increase the state cigarette tax by $2 per pack from the current $1.70 tax rate to $3.70 per pack; raise the tax on moist snuff to either 83% of the wholesale price or $3.70 per 1.2 ounces, whichever is greater; and increase the tax on all other tobacco products, including new taxes on electronic cigarettes and all vaping products, from the current 50% rate to 83% of the wholesale price, a 66% increase. The total expected new tax revenue from these higher tax rates is estimated to be $74 million. This is a massive tax increase on tobacco and vaping consumers that needs to be opposed.

Some of the expected additional tax revenue would be used to expand and fund Montana’s Medicaid coverage, smoking prevention and cessation programs, veterans services and Medicaid waiver services. However, more than half of any new tax revenue would go to the state’s general fund and not be directed toward any specific programs. This would give Montana state lawmakers a blank check to fund other programs with a tax targeting a minority of Montana residents who buy tobacco products. In short, I-185 would dramatically increase government spending with a revenue source that continues to decline over time. As smoking and tobacco use continues to decline, revenue from the sale of these products will drop, requiring additional tax increases in the future to make up the shortfall.

South Dakota IM-25: The South Dakota ballot question, known as IM-25, would increase the state cigarette tax by $1 per pack from the current $1.53 tax rate to $2.53 per pack and raise the tax on all other tobacco products from 35% to 55% of the wholesale price. The new tax revenue from the increased tax rates is projected to be $35 million.

One of the most important things to know about this new proposed tax is that there are no protections in place to ensure that the tax revenue is spent where it is earmarked. This means state lawmakers can divert the funds to the South Dakota general fund for other purposes. Moreover, as tobacco tax revenues contain to decline, South Dakota will be faced with raising other taxes or cutting spending to make up for the shortfall.

Educate Customers to Vote “No”: Retailers have just more than one month to remind their customers about these two ballot questions and urge them vote “No” to prevent these massive and burdensome tax increases from going into effect. Again, for point-of-sale information, contact Jim Duke of Altria Client Services.

Photograph: Shutterstock

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