Thursday, September 18, 2003

Time to consider a hike

Kentucky cigarette taxes

If there is a "third rail" in Kentucky politics, it might be the issue of raising cigarette taxes. Touch it, and you're toast. One of the top tobacco-growing states, Kentucky has the nation's second-lowest tax on cigarettes at 3 cents a pack - and its highest percentage of adult smokers.

But times are changing. And with a $700 million state deficit and rising health concerns over tobacco, the time is right for state lawmakers to seriously consider a major hike. Putting Kentucky's tax rate more in line with its neighbors could also reduce the incentives for cigarette smuggling and cross-border purchases.

The anti-smoking group Kentucky ACTION, the Enquirer reported Wednesday, will ask the General Assembly to raise the tax by 75 cents. It's not alone. In June meetings with members of the General Assembly, Northern Kentucky Chamber of Commerce officials discussed an increase to raise revenue for new capital projects. Educators groups have called for it. Gov. Paul Patton proposed a 37-cent hike in his budget this year, and state Rep. Jon Draud, R-Crestview Hills, co-sponsored a bill to increase the tax by 44 cents.

A 75-cent increase would bring $400 million a year in extra revenue to Kentucky. In a tough economy, that's been the lure for the more than 30 states that have raised cigarette taxes in the last year and a half. Ohio is among them. Last year, lawmakers raised the Ohio tax by 31 cents to a total of 55 cents; this year, with gloomy forecasts of multibillion-dollar deficits, they considered a further hike.

Anti-smoking groups have helped the push by talking about tobacco health risks, particularly among young people. They cite studies that show higher taxes discourage smoking, especially among teens. That's a win-win, they say: The state gets more revenue while cigarette consumption declines. When New York raised its tax by 55 cents in 2000, sales went down 20.2 percent while tax revenue went up 57.4 percent.

But using steep tax rises as a behavior modification tool is not the ideal sort of policy for states to pursue. Big Macs and SUVs could be next.

A better argument is Kentucky's need to fix its budget and correct an imbalance with surrounding states' tax rates. That would lower its tobacco sales to non-residents, of course. Lawmakers have to figure out what the right mix is to meet Kentucky's needs. But raising the state's laughably low cigarette tax rate is an issue they can no longer avoid.

State tax rates

Here are the per-pack cigarette tax rates in several states, along with the percentage of adults in each state who smoke.

Kentucky: 3 cents; 30.5 percent

Tennessee: 20 cents; 25.7 percent

Ohio: 55 cents; 26.2 percent

West Virginia: 55 cents; 26.1 percent

Indiana: 55.5 cents; 26.9 percent

Illinois: 98 cents; 22.3 percent

Pennsylvania: $1.00; 24.3 percent

Michigan: $1.25; 24.1 percent

National average: 72.9 cents; 22.8 percent

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