The Courier Journal reported on February 7 that Kentucky lawmakers were considering an increase in the state’s tobacco tax of 30 cents per pack of cigarettes, which would be a 100 percent increase.
In addition, higher taxes on alcohol are being pushed. One option would be to extend the state’s 6 percent sales tax to alcohol sales at package stores, or upping the tax at the wholesale from 11 percent to 25 percent.
According to the story:
According to preliminary LRC estimates, a 30-cent increase in the cigarette tax would generate about $50 million during the remainder of this fiscal year and $102 million in fiscal 2009-10.
Rep. Rick Nelson, D-Middlesboro, said his bill to raise the wholesale tax on alcohol to 20 percent would generate about $67 million a year. Applying the sales tax to package alcohol sales would raise an estimated $50 million annually.
Can this be stopped? Well, it was reported:
Any bill raising taxes this year will require approval by three-fifths of the members in each chamber -- 60 votes in the 100-member House and 23 in the 38-member Senate…
But Sen. Damon Thayer, R-Georgetown, said he hasn't counted votes and doesn't know if the tax increases would clear the Senate, even with leadership backing the legislation. "I'm not going to vote for it," Thayer said. "I don't think we should be raising taxes in a bad economy."
State Senator Thayer, of course, is correct. Higher taxes mean higher costs for consumers and businesses. Last time I checked, that, in fact, is not good for the economy.
For good measure, keep in mind that the general decline in smoking means that actual revenues rarely meet revenue projections when tobacco taxes are hiked. That means other taxes will have to rise at some point.
None of this is good for the state’s competitive position.
Raymond J. Keating
Chief Economist
Small Business & Entrepreneurship Council
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