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    In Minnesota, a Push to Keep 75-Cent Cigarette Fee Alive

    Attorney general argues that fee is a tax allowable under state law.

    ST. PAUL, Minn. -- Attorney General Mike Hatch asked the Minnesota Supreme Court on Wednesday to save the 75-cent-per-pack cigarette fee and rethink its appeal of a lower court ruling throwing out the 4 1/2-month old surcharge on tobacco products, reported the Associated Press. The attorney general's office also filed an appeal with the state Court of Appeals.

    Ramsey County Judge Michael Fetsch threw out the "health impact fee" last week, saying it violated a multibillion-dollar 1998 settlement between the state and the tobacco industry.

    Hatch's attorneys filed papers last week asking Fetsch to put his decision on hold while their appeal proceeds. They set a Jan. 18 hearing if Fetsch wants to hear arguments on the matter.

    There's no firm timeline for a Supreme Court decision, Deputy Attorney General Michael Vanselow said in the report.

    The fee was slated to raise about $400 million for the state budget over two years, according to the report.

    In seeking to reverse Fetsch's ruling, Hatch repeated an argument that puts him at odds with Gov. Tim Pawlenty, who first proposed the fee as a way of plugging a looming budget deficit earlier this year, AP reported.

    Hatch contends the fee is a tax allowable under state law. Pawlenty, who ran on a pledge of no new taxes, has insisted that the fee is not a tax.

    Pawlenty spokesman Brian McClung told AP that if the appeal fails, "the governor is inclined to simply drop the fee" and forgo the money it would have raised.

    McClung said in the report that could work because recent budget forecasts show a $700 million surplus over the next two years. He said the revenue the fee was expected to generate represents only about 1 percent of the two-year budget.

    Hatch said it is urgent that the Supreme Court quickly take up the dispute rather than let it proceed first through the Minnesota Court of Appeals.

    If the fee is invalidated, he told the high court, "the legislative and executive branches will need to consider other revenue sources and/or spending cuts to make up for the loss of this revenue."

    Pawlenty's Revenue Department has advised tobacco wholesalers to continue charging the fee, which is passed on to consumers. But the attorney general's office has determined that Fetsch's order prohibits further collections and it has asked for a stay of the order pending the outcome of the appeals, AP reported.

    The state has collected more than $101 million since it started charging the fee in August, and it would likely have to reimburse wholesalers if the appeal fails, according to the report.

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