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Debate lighting up over tobacco tax hike

FARGO -- Tobacco firms have cracked open their checkbooks to prepare to snuff out an attempt to pass an initiated measure that would bring a major hike in North Dakota's taxes on cigarettes and other tobacco products.

Dylan Schmidt says smoking can be a social occurrence.Dave Wallis / The Forum
Dylan Schmidt says smoking can be a social occurrence. Dave Wallis / The Forum

FARGO - Tobacco firms have cracked open their checkbooks to prepare to snuff out an attempt to pass an initiated measure that would bring a major hike in North Dakota's taxes on cigarettes and other tobacco products.

If approved, Measure No. 4, supported by the Raise It For Health North Dakota coalition, would raise the tax on cigarettes from 44 cents a pack to $2.20 per pack. On all other tobacco products, the tax would rise from 28 percent of the wholesale price to 56 percent.

Proceeds from the tax hikes - estimated to be about $200 million in the first biennium they take effect - would fund programs to help veterans and people with mental illness, chronic diseases or substance abuse issues, the coalition says.

Altria Client Services - part of Altria, the parent company of Philip Morris USA, maker of Marlboros, Virginia Slims, Basic and other brands of cigarettes - has funneled about $665,648 to the North Dakotans Against The 400% Tax Increase. R.J. Reynolds Tobacco Co. has given $194,725 to the same group, filings with the North Dakota secretary of state's office show.

Groups supporting the measure have raised far less.

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Raise It For Health has received $5,997.01 from the American Lung Association, $1,786 from OhFer Creative, $540 from Tobacco Free North Dakota and $500 from the North Dakota Medical Association.

Raise It For Health includes five major veterans groups and a raft of health and children's advocacy groups.

Kristie Wolff, a spokeswoman for the American Lung Association in North Dakota, said coalition members know they can't amass the same war chest as the tobacco manufacturers.

"We're going to continue to do education about the facts about the measure," Wolff said. "We'll never be able to go dollar for dollar with them."

North Dakota voters approved a strong smoke-free law and fully funded a tobacco prevention program, she said.

"We have confidence in the North Dakota voter," Woff said. "North Dakota voters don't trust Big Tobacco."

Half of the revenue would go to the veterans' tobacco trust fund. The other half would go to a community health trust fund, where it would be used to fund initiatives for mental health, substance abuse and chronic illnesses.

The national average state cigarette tax is $1.65 per pack, the coalition said. Minnesota's state cigarette tax stands at $3 per pack, with Montana at $1.70 per pack and South Dakota at $1.53 per pack.

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Local smokers say a price hike would be a drag.

Chris Compeau, 27, bartender at Rooters Bar in downtown Fargo, was recently taking a smoke break in the alley behind the bar.

"I'm from Minnesota, so I mean, I'm used to the cigarettes being a lot," the Fargo man said. "I thought moving to North Dakota I was safe here, but I guess not."

He expects the tax hike will pass on Nov. 8. "It's bound to happen eventually," he said.

Compeau, who smokes a pack of Marlboro NXTs a day, said a price hike might help him quit.

"It definitely gives me the extra motivation. I mean, I've been trying to quit for a few years, so I mean, it's definitely extra motivation for it."

Dylan Schmidt, 29, of Moorhead, Minn., was having a smoke outside Sidestreet Grille & Pub.

The Minnesotan buys his cigarettes in North Dakota, smoking a pack of Marlboro Lights a day.

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Schmidt said a tax hike would cut into his finances. "You have to set aside almost like 30 bucks - one week - add that up over a year," he said. "It adds up."

"If you raise the prices, more people quit, so I admire that. But the world's tough enough as it is."

He views smoking as a social lubricant that helps him to meet people.

"I'm not saying smoking's a good thing, but it would really suck if the prices went up," Schmidt said.

Business groups oppose the tobacco measure.

"We think that anytime you raise a tax by 400 percent, we think that's an overreach," said Andy Peterson, president of the Greater North Dakota Chamber of Commerce "Secondly, and perhaps more importantly, we have one group passing a tax on another group outside of legislative oversight."

Peterson said the precedent could make a hash of the state's tax structure.

"All of a sudden, you have pandemonium in the budget process," he said.

Mike Rud, president of the North Dakota Petroleum Marketers Association and chairman of North Dakotans Against The 400% Tax Increase, said jobs will be lost and small retailers will close if the measure passes.

"We're going to vigorously fight this," Rud said. "A 400 percent tax increase on a sale of a legal project has never been done before in the state of North Dakota."

He said the measure targets lower income people, who are more likely to buy tobacco products.

The measure also provides little oversight for how dollars raised will be spent, he said.

"It's essentially a blank check that will be written off the backs of the people in North Dakota that can least afford it," Rud said.

He said funding for veterans issues is better collected from all residents.

Wolff said raising the price of tobacco is the most effective way to keep children from starting to smoke.

"This is about preventing youth from smoking and about saving lives," she said.

About 11.7 percent of North Dakota high school students smoke, and 17.6 percent of high school males use smokeless tobacco, the Campaign for Tobacco Free Kids estimates.

Wolff said it is estimated that a tobacco tax hike would lead to a 20 percent drop in youth smoking and prevent 5,800 North Dakota children from becoming smokers.

About 1,000 adults die annually due to smoking-related disease in North Dakota. And smoking costs the state $326 million in health costs annually, the Campaign for Tobacco Free Kids estimates.

The North Dakota Veterans Coordinating Council, which includes the American Legion, Veterans of Foreign Wars, Disabled American Vets, AmVets and Vietnam Veterans of America, voted 15-0 to support the measure, state Legion Adjutant David Johnson said.

Johnson, of West Fargo, said tobacco firms provided daily cigarette rations to troops up through the Vietnam War.

"That is kind of where the addiction started (for veterans). It's the culture," Johnson said.

He said veterans have tried to get help from the Legislature for a number of issues, but have had little success.

Johnson said the extra tax revenues could fund veterans service officers, build another soldier's home in western North Dakota, pay for service dogs for soldiers dealing with post-traumatic stress disorder, help homeless veterans get medical and psychological care, and provide education on issues tied to the Vietnam-era defoliant Agent Orange.

Chris Compeau says paying more for a pack of cigarettes might provide more incentive to stop smoking.Dave Wallis / The Forum
Chris Compeau says paying more for a pack of cigarettes might provide more incentive to stop smoking. Dave Wallis / The Forum

Helmut Schmidt is a reporter for The Forum of Fargo-Moorhead's business news team. Readers can reach him by email at hschmidt@forumcomm.com, or by calling (701) 241-5583.
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