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Smokers, businesses face tax hikes in Ky.




FRANKFORT

Smokers and businesses would shoulder much of the burden for balancing Kentucky’s budget over the next two years under tax increases approved by a legislative committee this week.

The House Appropriations and Revenue Committee voted 20-9 on Tuesday to raise the state’s cigarette tax by 25 cents a pack – a move that is expected to generate nearly $200 million over the next two years to help erase a projected $900 million budget deficit.

Other tobacco products also would also be taxed at higher rates, as would air charters, armored car services, security services, commercial janitorial services and linen services. Combined, those taxes would generate an additional $95 million.

Budget committee Chairman Harry Moberly, D-Richmond, said the increased taxes coupled with cost-saving provisions would generate some $800 million over the next two years. One of the largest of those provisions calls for restructuring and refinancing general fund debts, saving about $300 million over two years.

Moberly said the House plan also calls for downsizing state government by not filling job vacancies when employees retire and for adjusting the state’s “floating” gas tax quarterly rather than yearly – a move that would more quickly raise state revenue as fuel prices increase.

The legislation that contains the tax increases to balance the state’s $18.6 billion budget now goes to the full House for consideration. The budget bill also passed the committee on Tuesday and goes to the House.

“If we don’t pass this, I think the effect on the commonwealth will be devastating,” Moberly told lawmakers gathered in a crowded meeting room in a legislative office building next door to the Capitol.

Lawmakers who voted for the tax increases said they didn’t take the issue lightly.

“There will be political fallout from this for people who support it,” said state Rep. Jim Wayne, D-Louisville, who voted for the measure. “There is no other alternative that is realistic that can pass the House.”

The additional revenue created under the measure will be used across state government, particularly in education and human services.

Moberly said teachers would get a 4 percent pay raise over two years at an additional cost of $195 million. Universities, he said, would get $263 million, which would allow them to maintain current programs without the threat of cuts.

About $130 million of the money generated would go to a variety of health and human service programs, including Medicaid, which provides medical care to the elderly and poor.

State Rep. Jimmie Lee, DElizabethtown, said he voted for the taxes despite having two opponents in this year’s legislative elections.

“It’s really difficult,” he said, “to be an advocate for education, an advocate for those who can’t speak for themselves, and then vote no today.”

The cigarette tax approved by the budget committee is substantially less than the 70 cents a pack that Gov. Steve Beshear had called for.

Even so, smokers aren’t happy. Danny Cottrell, a worker at Roger’s Tobacco shop in Upton, said the store’s most popular brand, Marlboro, would jump to $3.36 a pack if the tax increase is approved and signed into law.

Cottrell, a smoker, said Kentucky lawmakers seem too eager to increase cigarette taxes. Three years ago, they raised the tax from 3 cents to 30 cents a pack. That moved the state’s cigarette tax from lowest in the nation to third lowest in the nation.

Beshear said Tuesday he still favors raising the cigarette tax by 70 cents. Tonya Chang, a lobbyist for the American Heart Association in Kentucky, said raising the tax that much would cause some smokers to give up cigarettes.

She said that’s critical in Kentucky, which has the highest smoking rate in the nation.

Nearly 28 percent of Kentucky adults smoke, as do nearly 25 percent of Kentucky teens, according to the Centers for Disease Control and Prevention in Atlanta.


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