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Tech schools seek revenue source in tobacco tax

BROOKINGS — Both sides in the debate over an increased tobacco tax say that the measure would have an effect on jobs.

On Nov. 6, voters will decide the fate of Initiated Measure 25, which seeks to raise the tax on tobacco by $1 per pack of cigarettes as well as increase the tax on other tobacco products.

The first $20 million raised by the tax increase would be earmarked to reduce tuition and fees at the state’s four technical schools. If approved by voters, the tax would start being collected on July 1, 2019.

High tuition costs at South Dakota tech schools are driving some students out of state, exacerbating shortages of skilled workers according to Dick Muth, co-chairman of the IM 25 effort.

“There’s an unbelievable shortage of technicians in this state to do all sorts of things,” Muth said, noting that tech school tuition in some surrounding states may be half of what South Dakota students are paying.

Jobs are also at the center of the argument against IM 25.

“We anticipate there could be a loss of 400 jobs,” said Steve Westra, chairman of South Dakotans Against Higher Taxes. “Many retailers are already struggling.”

Those jobs would be lost, according to Westra, as customers seek cheaper cigarettes across the border, on Indian reservations or on the internet.

Westra notes that the tax on a pack of cigarettes in North Dakota is 44 cents. If IM 25 passes, South Dakota’s tax on the same pack of cigarettes would be $2.53.

Westra said there’s nothing in IM 25 to keep the Legislature from diverting the increased tobacco tax to other uses.

“It lacks taxpayer protection,” Westra said.

“That’s just something that’s being said by the opposition as a scare tactic,” Muth said.

Muth’s co-chair, Dana Dykhouse, agrees.

“If the people speak, the Legislature would be very foolish not to follow the wishes of the voters,” Dykhouse said.

South Dakotans Against Higher Taxes started running commercials early in the election cycle. Muth and Dykhouse see that as a sign of an early and large investment by tobacco companies.

“The opposition is primarily funded by large tobacco companies,” Dykhouse said. “We anticipated that.”

Westra doesn’t agree with that characterization.

“We’ve built a pretty solid coalition,” Westra said, with members that include South Dakota retailers and petroleum marketers.

Westra notes that both of the state’s major political parties have come out against IM 25.

“That, in and of itself, ought to tell you that this is bad policy,” Westra said.

The two sides in the debate can’t agree on how much will be raised by the increased tobacco tax. IM 25 backers rely on state budget officials’ estimate that the increase will raise $25 million with the first $20 million earmarked for technical school tuition relief.

Westra’s organization estimates the increased tax will raise $35 million.

“They are taxing more than even what’s being requested,” Westra said.

Dykhouse sees the funding as the key to sparking a new day in technical education in South Dakota.

“It is a critical need for South Dakota to get workers and train workers in the skills that are needed,” Dykhouse said.

According to Westra, enrollment is up at the state’s technical schools.

“There’s nothing that’s preventing these students from attending,” Westra said.

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