Tobacco industry gives $6.5M to oppose South Dakota tax hike

October 23, 2018 GMT

SIOUX FALLS, S.D. (AP) — The tobacco industry contributed roughly $6.5 million to oppose a ballot question that would increase South Dakota tobacco taxes to make state technical schools more affordable, according to state campaign finance reports.

The campaign filings show the lobbying arms of the companies that make Marlboro and Camel cigarettes are funding the opposition campaign, South Dakotans Against Higher Taxes. Altria Client Services contributed nearly $6.2 million in cash, loans and donated goods or services to the group through Oct. 18, amounting to almost all of its donations.

Altria is the parent company of Philip Morris USA. RAI Services Company, the lobbying arm of R.J. Reynolds’ parent company, has given more than $275,000 in cash and donated goods or services to the opposition group.

Voters on Nov. 6 will decide on Initiated Measure 25, which would increase taxes on different tobacco products including a $1 hike per 20-cigarette pack. South Dakota’s cigarette tax is $1.53 per pack, according to the Tax Foundation, an independent tax policy nonprofit.

The roughly $6.5 million in contributions from Altria Client Services and RAI Services Company dwarfs by millions of dollars in combined total fundraising the Democratic and Republican candidates for South Dakota governor reported in their pre-general election filings.

South Dakotans Against Higher Taxes didn’t receive any contributions from individual donors. The group spent about $4.3 million — roughly $3.1 million on advertising — and ended the finance period with nearly $1.7 million in the bank.

Chairman Steve Westra said in a statement that the group has brought together a diverse coalition who oppose the initiative and is mounting an aggressive campaign to “educate voters on why they should reject this flawed measure.”

“South Dakota consumers will pay $35 million more in taxes every year under IM-25, but the measure includes no taxpayer protections to ensure funds are spent how South Dakota voters are promised and not diverted to the General Fund or other projects,” Westra said.

The state Legislative Research Council in an August fiscal document estimated the measure would raise revenues by a lower amount: about $25 million. The document estimates about $5 million of the increased revenues would go to the general fund, while $20 million would go to the technical institutes.

Republican House Speaker Mark Mickelson, the ballot question’s sponsor, said in a statement that the opponents’ campaign is about the sale of cigarettes — not about school funding, reducing technical school tuition or workforce development. Supporters’ finance report wasn’t yet available Tuesday evening for review.

A report last year to a legislative panel found that South Dakota’s tech institutes charge the highest average resident fees and tuition regionally. The ballot measure would create a fund to lower the tuition and fees, offer scholarships and provide financial support for the state’s four technical institutes.

State voters last approved a tobacco tax hike in 2006 with nearly 61 percent support. Voters in neighboring North Dakota in 2016 rejected a ballot question that would have raised the state’s 44-cent cigarette tax to $2.20.