Business groups protest automatic tobacco tax hike

A coalition of retailers and business organizations is calling for an end to automatic cigarette and tobacco tax increases in Minnesota.

Business groups say high tobacco prices in Minnesota encourage smuggling and end up costing the state money and jobs. The groups sent Gov. Mark Dayton a letter protesting the pending increase to $3.54 per pack, a figure they characterized as "astounding."

Lance Klatt, who directs the Minnesota Service Station Association, said high tobacco taxes are cutting into all kinds of sales, especially in border communities.

"When you look at not only the tax revenue on cigarettes and tobacco you're losing, you've lost the revenue on your gasoline sales, you've lost the tax revenue on inside-store sales, and then on top of that, when the store goes out of business, you're losing property taxes from the store," Klatt said.

The state tax on tobacco is set to rise Jan. 1, based on inflation.