Tobacco Companies Attack Minnesota's "Health Fee" on Cigarettes

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Tobacco Companies Attack Minnesota's "Health Fee" on Cigarettes

ST. PAUL, Minn. -- Call it a fee or call it a tax -- either way, lawyers for the big tobacco companies argued Thursday that the state of Minnesota went back on a 1998 tobacco settlement when it implemented a 75-cent increase in the state charge on a pack of cigarettes, according to an Associated Press report..

"Whether it's a fee or a tax, the fact of the matter is the purpose was to reimburse the state for costs the tobacco companies are already reimbursing," Steve Patton, a lawyer for R.J. Reynolds, who argued for several major tobacco companies during a hearing in Ramsey County District Court, told the AP .

According to the report, Gov. Tim Pawlenty, who proposed the so-called "health impact fee," had insisted on that terminology to hold to his own pledge to not support tax increases. The tobacco company lawyers said it should be overturned because the billions of dollars from the tobacco settlement already pay for state health costs from smoking -- something the health impact fee now purports to do as well, though much of the money actually goes to education programs.

The 1998 settlement language expressly prohibited future claims on tobacco companies, the tobacco lawyers argued, according to the AP report.

"The state in essence, by the health impact fee, is seeking to double-dip," Murray Garrick, another tobacco lawyer told the AP .

According to the report, state lawyers argued that the language in the settlement only prohibited future court claims, not legislative action. Patton acknowledged that if the health impact fee had instead been passed as an undedicated excise tax, the tobacco companies probably wouldn't have brought the case. Should the tobacco companies prevail, the state would have to make up $401 million in expected collections from the tobacco charge.

On Thursday, Judge Michael Fetsch allowed so-called "non-settling" tobacco companies -- small companies that didn't participate in the 1998 deal -- to intervene in the case on the side of the state. They support the state since they would still have to pay the health impact fee even if the court overturns it for the bigger companies, according to the AP .