Saturday, February 7, 2004

Fletcher OK with tobacco tax hike

Support possible if part of larger reform package

By Patrick Crowley
The Cincinnati Enquirer

COVINGTON - Gov. Ernie Fletcher would consider supporting a hike in the state cigarette tax provided it is part of an overall retooling of Kentucky's tax system.

Fletcher inherited a $1 billion budget deficit when he took office less than two months ago. He said Friday that any increase in Kentucky's 3-cents-a-pack tax would have to be offset by a cut in other state taxes, possibly personal income or business taxes.

Increasing the cigarette tax has "been discussed quite a bit, and that's likely part of the tax modernization plan," Fletcher said after a speech to more than 300 members of the Northern Kentucky Chamber of Commerce.

"We're not making a firm suggestion at this time" on the size of such a tax increase, Fletcher said.

"We need to be cautious with what we do, but recognize it is probably time." Kentucky's is the second-lowest cigarette tax in the nation.

"If we can get the cooperation we need, we'll move it this year," Fletcher said.

Fletcher used his Northern Kentucky appearance to compliment the region - a great supporter of his - on its economic value to Kentucky.

But his biggest news was the proposed cigarette tax increase - one that has been fought for years in the tobacco state.

Backers of the tax hike have floated ideas for an increase from 30 cents to 75 cents, though Frankfort Republicans said Friday that Fletcher would probably not back a hike of more than 35 cents a pack.

But even at 35 cents, state tax revenue would grow by $175 million a year, based on Revenue Cabinet estimates that every penny of tax raises $5 million.

Fletcher said some state lawmakers are interested in sponsoring his tax modernization plan. He did not name them.

"I don't want this to be a political football," he said. "It needs to be an approach that is bipartisan."

State Rep. Jon Draud, R-Edgewood, has been one of the most vocal supporters of raising the cigarette tax as a way to raise revenue and help cut Kentucky's teen-smoking rates, which are among the highest in the country.

Senate President Pro Tem Dick Roeding, R-Lakeside Park, said Friday that Fletcher's plan would have a chance of passing General Assembly muster as long as the overall tax package raises but also reduces taxes.

"We don't want any new taxes," Roeding said. "And we want to make sure the money is spent right ... and I want to make sure some of it comes back here to Northern Kentucky."

During his speech, Fletcher received loud applause after mentioning the local education-related projects he put in the state's two-year budget:

• $42 million to build a regional special events arena at Northern Kentucky University.

• $14 million to expand the campus at Gateway Community and Technical College in Edgewood with a building to provide nursing education.

Lawmakers must still approve Fletcher's budget, but local officials and supporters have praised Fletcher's attention to Northern Kentucky.

"Northern Kentucky finally has a governor," said Marc Wilson, a lobbyist and GOP political consultant.

Fletcher pledged, but offered no specifics, to increase spending on road construction and repair in the region.

But he did say he has lobbied federal officials to spend money to replace the Interstate 75 Brent Spence Bridge between Cincinnati and Covington.

"Northern Kentucky is one of the pillars of this commonwealth, and one of the pillars of its economy," he said.

"And you grow an economy through investment ... and we're going to invest in Northern Kentucky."

Danny Fore, president of Northern Kentucky Tri-ED, the region's job recruitment and retention agency, said Fletcher's approach to improving education, infrastructure and the tax system will help boost the economy and make the region more attractive to businesses.

"If we don't get that (Brent Spence) bridge replaced, we're going to strangle our traffic here," Fore said.

"And that's going to hurt transportation and the economy."

Fletcher also said he would work to extend and possibly expand the state's enterprise zones, areas where businesses can receive tax breaks for investing in new buildings and equipment. Covington and northern Campbell County are in enterprise zones that are set to expire over the next few years.

"It's great to see the governor is going to take a leadership role that is really important for existing business in Northern Kentucky," said Steve Stevens, the chamber's Frankfort lobbyist and vice president of government affairs.

"These zones have shown to the state that they are valuable and do produce an economic benefit."


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