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Updated: May 16th, 2013 6:22pm
Gov. Dayton proposes cigarette tax hike to help fund Vikings stadium

Gov. Dayton proposes cigarette tax hike to help fund Vikings stadium

by The Associated Press
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ST. PAUL, Minn. -- Gov. Mark Dayton proposed a new backup plan Thursday to shore up the state's lagging share of the new Minnesota Vikings stadium, suggesting lawmakers use money from a tax increase on cigarettes and closing corporate income tax loopholes.

Dayton's revenue commissioner, Myron Frans, unveiled the latest proposal in the House-Senate tax conference committee. It threw the contentious stadium issue back in the lap of lawmakers as they rush to wrap up this year's session by Monday.

"We think this will solve the stadium financing issue," Frans said.

The state's $348 million share of the $975 million downtown Minneapolis stadium was supposed to be fueled by tax revenue from new electronic betting games that last year's Legislature authorized in bars and restaurants. But sales of those games so far have badly trailed initial projections. The latest proposal calls for setting aside an estimated $24.5 million in one-time revenue that would be generated by applying a planned cigarette sales tax increase to existing cigarette inventories before the tax actually goes up - an approach Frans called a "stocking tax."

Dayton is now backing a cigarette tax increase from $1.23 per pack now to $2.52, more than he initially proposed. The money from the stocking tax would be diverted to a stadium reserve fund. Smoking will not be allowed at the new Vikings stadium, due to open in time for the 2016 season.

Earlier this year, Dayton proposed a cigarette tax hike of 94 cents a pack. In now backing a $1.29 per pack hike, he's moving even further from his previous opposition to cigarette tax increases of any kind. When running for governor in 2010, he called cigarette tax hikes "money out of the pockets of working people and poorer people."

If the cigarette tax increase still isn't enough to cover stadium funding shortfalls, additional backup money would come from beefing up collections of business income that Dayton's administration said some corporations have avoided paying by attributing in-state sales to out-of-state affiliates. That's estimated to raise $26 million for the fiscal year starting July 1, and $20 million a year after that.

If the money isn't needed for the stadium, Frans said, it would simply remain in the state's general fund.

"This is a way to make sure the state has the income to keep its end of the bargain," Frans said. It would replace a previous backup plan proposed by lawmakers cover stadium funding shortfalls with a sales tax on pro sports memorabilia and luxury seats at pro sports venues.

Republicans seized on the fact that the new proposal would seize tax revenue that could be spent on more general state priorities.

"We were promised, those of us who voted against the stadium, that this would not end up coming from the general fund," said Sen. Dave Thompson, R-Lakeville. "This is money that could otherwise go to schools, health and human services and the like."

The House-Senate tax conference committee voted in favor of Dayton's proposal, but left some details to be filled in later, such as the exact size of the cigarette tax increase. Tobacco taxes are still an issue in the ongoing budget negotiations.

© The Associated Press
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