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Legislators consider 30 cent cigarette tax hike

By Bryan Marshall

What’s next?

That is the question Dennis Kenner, owner of Bluegrass Discount Tobacco Outlet in Williamstown and Falmouth, is asking as legislators prepare to debate Gov. Steve Beshear’s proposed 70-cent cigarette tax increase.

“I don’t want to see cutbacks in schools either, but there’s other areas of revenue that the state can look at,” Kenner said. “The thing that the average customer needs to think about, even those who don’t smoke, is what is going to be next? The state of New York right now is looking at putting an 18 percent tax on soft drinks that have sugar in them. What’s next?”

Beshear discussed his plans to combat a $456 million budget shortfall during a town hall meeting at Grant County High School in December.

His proposal included raising an estimated $81.5 million in revenue by increasing the cigarette tax by 70 cents to $1, as well as increasing the tax on other tobacco products.

House legislators were scheduled to discuss a tax plan Wednesday, Feb. 11 that was passed by a budget committee.

The plan included a smaller 30-cent cigarette tax hike, along with a 6 percent sales tax of package alcohol sales at liquor stores and groceries.

The governor said Kentucky’s tax on cigarettes is currently fourth lowest in the nation, while the state ranks first in the nation in the number of smoking related deaths each year — 371 deaths out of every 100,000 adults 35 and older.

“My friends, how many more statistics do we need before we do the right thing for Kentuckians?” Beshear said during his State of Commonwealth speech on Wednesday, Feb. 4. “The people of this state overwhelmingly support a significant increase in tobacco taxes. You see, Kentuckians are not anti-tax. They are anti-unnecessary taxes.”

There are at least quite a few of Kenner’s customers who are not happy with the possibility of shelling out more for their cigarettes.

About 900 signatures are on a petition at the Williamstown store voicing their opposition toward the tax increase.

The petition will be faxed to local legislators, including state Sen. Damon Thayer and state Rep. Royce Adams.

At this time, Thayer said he does not support an increase of any tax.

“In general, I’m not someone who favors increasing taxes, especially in an economic recession,” he said. “It’s just not a good time to take money out of the pockets of hard working Kentucky families. Kentucky government needs to do what families and businesses are doing and tighten our belts and figure out what’s important to set our priorities and make cutbacks in areas where there is room to bring some fiscal restraint to state government.”

Adams said he did not want to commit himself to opposing or supporting the tax until he hears from his constituents.

The last time a proposed cigarette tax increase was proposed, Adams said he received more calls in opposition.

“I think the cigarette tax increase is a tax that’s going to be a regressive tax because it will continue to go down,” he said. “Certainly, if they raise the price on cigarettes, there will be less people smoking. So, it’s not going to bring in the revenue that we need. At this time, I don’t have any solutions, but I’m willing to listen to any ideas from my constituents and colleagues.”

In every state that has significantly raised its cigarette tax rate, pack sales have gone down sharply.

Cigarette sales fell 18 percent in North Carolina after the tax was raised in two steps to 35 cents from a nickel.

Connecticut increased its tax to $1.51 a pack from 50 cents per pack in 2002 and the per capita consumption has fallen 37 percent since.

If passed, the state cigarette tax increase will be a “double whammy” to smokers and tobacco business owners after a recent federal tobacco tax increase, Kenner said.

President Barack Obama signed a bill Wednesday, Feb. 4 expanding the State Children’s Health Insurance Program (SCHIP) by about $35 billion over five years.

The bill, which takes effect April 1, will be financed with a 62-cent-per-pack increase to $1.01 in the federal tax on cigarettes, as well as tax increases on other tobacco products.

“I feel like both the president and the governor ran on platforms that they weren’t going to increase taxes,” Kenner said.

In today’s economic downturn, Kenner said it is tough to ask one segment of the population to pay the bills for everyone else.

Kenner, who has 11 employees between his two stores, said some tobacco stores also could be impacted significantly by the decrease in business that a tax increase would inevitably bring.

“We’ll do OK with this,” he said. “We may have to cut back on employees a little bit, but there is a lot of stores that will go out of business altogether because of this. In our environment, do we want to be laying off employees or closing stores?”