Too Clever for His Own Good.
When is a fee a tax? That's an economic, legal, and today, political question.

In Minnesota, the politicians (Republican governor, Republican House, Democratic Senate, long history of expansive government) did the unthinkable: erase a large ($4 billion, I think it was) budget deficit without raising any significant tax increases.

Last year the "No New Taxes" governor gave ground. Whether it was an acknowledgement of a changing political landscape, a change in convictions, or the result of poor strategic or tactical considerations in politics is a question for others to decide. But the means of increasing the government bite into personal incomes was in some ways more damaging than the actual increase in taxes.

Here's why: Governor Tim Pawlenty insisted that a tax on tobacco was not a tax, but a "health impact fee." Never mind that it looks like a tax, walks like a tax, and talks like a tax (cigarette prices went up 75 cents a pack, and no, I don't smoke, thank you very much). Never mind that by some estimates, smokers actually save the taxpayer money by dying early. (To be fair, I think those estimates are for governments as a whole—the feds may save money while the states just may lose money. Then again, “saving money” could be an excuse for, oh, a 100 percent tax on anything but tofu.) Never mind that fees are for what government provides--a license to drive, permission to play golf on a city-owned golf course, etc. Nope, it's a fee, said the governor, not a tax.

Why the game with language? One possibility: the fee gave the governor a small bit of ground by which he could claim to have kept his no-new-taxes pledge. Another possibility: it would keep him out of legal trouble with Indian tribes and an agreement the state made a few years ago with tobacco companies.

Well, it didn't work. David Strom, one of Governor Pawlenty's most vocal critics on the "health impact fee," comments on a significant ruling recently handed down by the court that oversees the state's tobacco settlement.

Says Strom: "the tobacco companies agreed to pay the state a whopping $6 billion to cover the supposed increased health care costs imposed upon the state by smokers, and in return the state would indemnify them against any future claims by the state government to cover such costs.

What I did not know, and as a non-lawyer really could not know, was whether the HIF actually violated the letter of the contract.

Now we know."

Indeed we do. So much for creative revenue enhancement.

Oh yeah. David, you certainly can say "I told you so."

Labels: Golf

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