February 22, 2021
Members of the Minnesota Senate Committee on Taxes
From: Americans for Tax Reform
On behalf of Americans for Tax Reform (ATR) and our supporters across Minnesota, I urge you to reject Article 2 of SF 961, misguided legislation which will increase taxes on life-saving reduced risk tobacco alternatives such as electronic cigarettes. If enacted, these anti-science provisions would have a disastrous impact upon not only businesses, but public health throughout the state, and lead to an increase in tobacco-related mortality. SF 961 also seeks to increase the highly regressive tax on tobacco, disproportionately harming the state’s most vulnerable populations at a time when they can least afford it, while doing nothing to reduce smoking rates. Even former President Obama remarked when he was in office: “The last thing you want to do is raise taxes in the middle of a recession because that would just suck up, take more demand out of the economy and put businesses in a further hole.” Yet Article 2 of SF 961 flies in the face of that sage advice from the 44th President. As such, we strongly urge you to amend SF 961 to remove Article 2, or to reject the bill in its entirety.
It is important to note that poor public health policies already implemented by the Minnesota legislature have already had disastrous consequences on the citizens of your state. The National Bureau of Economic Research determined that Minnesota’s tax on vaping products, prevented 32,400 additional adult smokers from quitting smoking. This entirely self-inflicted public health disaster caused by the Minnesota Legislature will be further compounded if this bill is enacted as presently written.
Data from the National Adult Tobacco Surveys has consistently demonstrated that tobacco tax increases have no statistically significant impact on the prevalence of smoking among those with household incomes of less than $25,000. Seventy-two percent of smokers are from low-income communities, and increasing taxes on people unable to quit as they are struggling with the costs of the COVID-19 pandemic will put unnecessary hardship upon families who are already struggling to make ends meet.
Further, cigarette tax hikes promote black markets for smuggled tobacco products, and consistently result in revenues coming in well below revenue projections. Contrary to popular belief, tobacco smuggling is not a victimless crime consisting of someone purchasing a few extra cartons across state lines. In reality most tobacco smuggling is run by multi-million dollar organized crime syndicates. These networks, who also engage in human trafficking & money laundering, have also been used to fund terrorist and the US State Department has explicitly called tobacco smuggling a “threat to national security”. Minnesota already has significantly higher tax rates than any neighboring state. In particular, it is close to seven times the rate in North Dakota. As a result of these high tax rates, more than 35% of all tobacco consumed in the state comes from illicit sources. If this bill passes, it would increase significantly to the level found in some other states; as high as over 50%. As a result, it is highly unlikely that this bill would meet revenue projections. Only three out of the 32 state tobacco tax increases studied met tax revenue estimates. For this reason, economists and tax policy experts view cigarette taxes as unsound policy, and it is highly unlikely that revenue projections will be met.
Rather than repeating the failed policies of the past and further punishing low-income smokers unable to quit, the Minnesota Legislature should embrace new methods that are proven to help reduce smoking rates, and facilitate smokers quitting through reduced risk tobacco alternatives such as e-cigarettes. Through delivering nicotine through water vaper, these mimic the habitual nature of smoking, however, the absence of “smoke” leads to the absence of the carcinogens created through the combustion of tobacco. As a result, these have been overwhelmingly proven to be 95% safer than combustible cigarettes, while least twice as effective as more traditional nicotine replacement therapies.
It must be stressed that the negative effects of smoking combustible tobacco come not from the nicotine, a relatively benign, yet highly addictive substance much like caffeine, but rather the chemicals produced during the combustion process – “people smoke for the nicotine but die from the tar.” Scientific data clearly shows that the blood levels typically achieved by consuming nicotine via harm reduction products “does not result in clinically significant short- or long-term harms” which is why smokers have been using nicotine replacement therapies (NRT) for decades without incident. For this reason, over 30 of the world’s leading public health organizations have endorsed nicotine vaping as safer than smoking and an effective way to help smokers quit. This list includes Cancer Research UK; the British Medical Association; the British Lung Foundation; the New Zealand Minister of Health; the US National Academies of Sciences, Engineering, and Medicine; the American Association of Public Health Physicians; the Royal Australian College of Physicians; the French National Academy of Pharmacy; and the German Federal Institute for Risk Assessment.
To tax safer products at such a high rate, thereby driving people to more deadly alternatives, goes against every principle of sound public or health policy. As the price of a product increases, it is likely that its use decreases. The same occurs with taxes on vaping, which have been proven to increase smoking rates as people shift back to deadly combustible cigarettes.
Extrapolating from a large-scale analysis by the US’s leading cancer researchers and coordinated by Georgetown University Medical Centre, if a majority of smokers in the state of Minnesota made the switch to vaping, over 125,000 lives would be saved. In seeking to tax these life-saving products, Article 2 of this bill would place these lives in jeopardy. Small increases in projected revenue should never come at the expense of human lives – and make no mistake, if this is enacted, it will cost lives.
For the reasons outlined above, in the interests of public health, preventing a boon in criminal activity, and protecting the most vulnerable in society from financial hardship at a time they can least afford it, we call upon the Committee to accept the science and amend SF 961 to remove Article 2. Over 100,000 lives depend upon it.
Director of Consumer Issues
Americans for Tax Reform