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After tax hike, cigarette sales down, tax revenue up

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Throughout the debate earlier this year over a tobacco tax hike in Minnesota, shop owners who sell cigarettes said they feared a new $1.60 per-pack tax hike would hurt sales. State budget officials expected the state's tax revenue would jump.

They were both right.

MPR reports that the new law took effect July 1, and cigarette sales in the state fell 35 percent in July compared to July 2012, according to initial numbers from the Minnesota Department of Revenue. Tobacco stamp sales for August picked up a bit, but were still down 12 percent compared to August 2012.

Meanwhile, cigarette sales taxes are up more than 56 percent for July and August compared to the two-month period in 2012, MPR reports.

State officials had said they expected that the tobacco tax hike would cut cigarette consumption by about 30 percent in Minnesota, although that can't be calculated yet, MPR reported.

But besides the sales drop, there is anecdotal evidence that smokers are trying to quit – or scrambling for cigarette alternatives. Officials with ClearWay Minnesota, which offers help to people who are trying to quit smoking, said interest in their programs is up dramatically over last year.

Shop owners say "roll-your-own" cigarette products are up.

Of course, some smokers are crossing the Minnesota border to buy their cigarettes. Minnesota's tax is now $2.83 a pack, compared to 44 cents in North Dakota; $1.53 in South Dakota; $1.36 in Iowa; and $2.52 in Wisconsin, MPR reported earlier this year.

In a related story, in the face of the rising popularity of electronic cigarettes, 40 attorneys general, including Minnesota's, sent a letter to the U.S. Food and Drug Administration this week, prodding the the agency to meet a deadline to regulate the battery-powered cigs in the same way it regulates tobacco products.

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