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Wednesday, December 21, 2005

Merry Christmas, Governor

A Ramsey county judge has ruled that the tobacco “health impact fee” (i.e. “tax”) is illegal as it violates the settlement the State of Minnesota agreed to to end its "lawsuit" (i.e. "shakedown") of the tobacco companies. This is great news for the economic health of the state and, if handled properly, an unanticipated but welcome chance for Governor Pawlenty to repair the damage he inflicted to his political base.

The governor has indicated that the ruling will be appealed on the grounds that the state is not bound by the agreement as it was made under the previous administration. Bad move, Governor. It was ill-advised, both policy-wise and politically, to play nice with the DFL and impose the tax in the first place. Look at this ruling as an early Christmas gift that should not be returned. If the DFL wants to modify the way the tax is implemented to pass legal muster let them fight for it in the next legislative session. Just come out and publicly state that it was a mistake to propose the tax in an effort to compromise with the tax-and-spend-addicted DFL to end the government shut down they forced in the first place (and note how you were stabbed in the back for your gesture).

Since this administration and the last legislature didn't seem to have any problem whatsoever with spending the money the shakedown of the tobacco companies brought in, it appears that the argument that the state is not bound by the agreement is disingenuous at best. Using this logic, we citizens should not be bound by tax legislation made by previous administrations and legislatures (hey, maybe this argument does have some merit, though I doubt any court would see it that way).

The recently announced revenue surplus will more than cover for the revenue the tobacco tax would have brought in (assuming that there are enough tobacco dealers not driven out of business to collect the revenue), so there is absolutely no need for the tax. There will still be a surplus even if the tobacco revenue loss is offset.

Merry Christmas, Governor. Please don't return this gift that will politically and economically keep on giving.


Blogger G-man said...

Yep, the Guv messed this one up. When the government affixes a "fee" on private sector products, it is no longer a fee – it's a tax.

As Right Hook points out, the recently announced revenue surplus should pick up the slack. But, this should be no surprise. Cutting taxes, or preventing increases as Governor Pawlenty did 3 years ago ultimately leads to economic growth. The private sector is far more productive at growing the economy than government. It's called Reagonomics and it works every time it's tried.

Interesting that Senate Minority Leader Harry Reid complained tody about tax cuts to the rich. But it's the "rich" that employs the nation and produces a bigger economic pie. Tax cuts for the so-called rich not only helps those whom they employ, but it helps the government for the bigger pie results in bigger tax revenues for government programs.

When Democrats whine about tax cuts for the rich, it is not the benefit of government for which they cry – it is for their decreasing power to control social behavior.

Sadly, Governor Pawlenty seems to have fallen into this "social modeling" trap. Yesterday he defended the cig tax by suggesting that numerous smokers are quitting due to the higher costs. Curious, I thought the cig tax was to bring in more revenue. How can it bring in the expected revenue if smokers stop buying cigarettes?

12/21/2005 12:54 PM  

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