Thursday, October 16, 2003

Kentucky's cigarette tax

End the resistance

Kentucky's elected leaders could be the last in the state to face reality that their ridiculously low 3-cent cigarette tax needs puffing up. Even the AARP, the powerful older-Americans lobby, called this week for Kentucky to raise its cigarette tax by 25 cents a pack. With the state's $700 million budget deficit, who knows what is the optimal tax increase? But as long as Kentucky's cigarette tax ranks second lowest in the nation, after Virginia's, a healthy increase should be on the General Assembly's budget table.

Kentucky ACTION, an anti-smoking group, and Northern Kentucky Rep. Jon Draud, R-Edgewood, have proposed a tax increase up to 75 cents per pack. But even though the national average is 72.9 cents, Ohio's tax is 55 cents and Indiana's is 55.5 cents, Kentucky lawmakers still cling to the 3-cent tax, as if the world hasn't changed. Yes, Kentucky is still a top tobacco grower state and the leading smoker state at 30.5 percent, but Kentuckians may be out ahead of the politicians on this one. Most growers are for dumping federal price supports, and an independent phone survey conducted for AARP found public support for a 25-cent tax increase.

Kentucky AARP President Bill Harned estimates that tax increase would raise $100 million a year, which could be leveraged to attract $333 million in federal matching funds. And it would still leave Kentucky among low-tax states.

Candidates for Kentucky governor are cool toward raising the cigarette tax. Both Republican Ernie Fletcher and Democrat Ben Chandler oppose what they call "stand-alone tax increases" and instead favor broader tax modernization packages. So modernize cigarette taxes. Chandler says such taxes are regressive, unfairly burdening the poor. But it's not as if it's a direct tax on basic necessities such as food, housing or health care.

Higher cigarette taxes can deliver health benefits by discouraging smoking. A 2000 study ranked Kentucky highest in middle-school smokers, with a 21.5 percent rate; high school students were worse, at 37.4 percent. When New York raised its tax to $1.50 a pack, sales went down 20 percent while tax revenue went up 57 percent. A higher Kentucky tax also would reduce the temptation for cigarette smuggling and cross-border purchases. Raise the 3-cent tax substantially.

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