Tax Update
Smokers load up on cartons as Kentucky’s cigarette tax hike goes into effect
June 01, 2005
By BRUCE SCHREINER
Associated Press Writer
LOUISVILLE, Ky. (AP) The first cigarette tax increase in a generation in this tobacco-rich state took effect Wednesday a 27-cent-a-pack hike that had smokers scrambling to load up on smokes in the hours before it became law.
“It’s class warfare,” said Rob Ludwig of Jeffersonville, Ind., who made the short drive to Cox’s Smokers Outlet in Louisville on Tuesday. “There’s so much discrimination against smokers anymore, it’s almost worse than being a drug dealer or drug user.”
Kentucky’s tax is now 30 cents per pack, from a national low of 3 cents. The increase was part of a tax overhaul that raised taxes on alcohol, removed hundreds of thousands of poor Kentuckians from state income tax rolls and cut corporate tax rates.
Gov. Ernie Fletcher has called Wednesday a “historic” day for Kentucky and said one penny of the 27-cent increase will be set aside for cancer research.
Bob Grantz, manager of Cox’s Smokers Outlet, said some customers who normally purchase several cartons at a time bought a case containing 30 cartons in the days leading up to the tax hike.
“June will be dead,” he said. “Some people bought a month’s supply, some people bought two months’ supply.”
Even with the higher tax, Kentucky’s rate is below those in neighboring Indiana, Ohio, Illinois and West Virginia. But in Tennessee, the current rate is 20 cents.
“It’s going to be bad,” said Pat Smith, owner of The Tobacco Barn in Fulton in far southwestern Kentucky. “I think it’s going to hurt us.”
For public health advocates, Wednesday fulfills a long-sought goal of raising the cigarette tax in a state where smoking is a way of life for a large portion of the population. For years, the proposal was a nonstarter in the state General Assembly.
“It is ushering in a new era when it comes to public health in this state,” said Mike Kuntz, spokesman for the American Lung Association of Kentucky. “It’s a real recognition of the dangers of tobacco use.”
Kuntz said health activists eventually would like to see the state’s cigarette tax rate raised to close to $1 per pack.
But he said the 27-cent increase should lower smoking rates, especially among youngsters.
Kentucky has the nation’s highest adult smoking rate at nearly 31 percent, according to a report last year by the Centers for Disease Control and Prevention. Another federal report last year said Kentucky has the nation’s highest lung-cancer death rate among men, and a higher-than-average death rate among women.
http://wfrv.com/nationalwire/CigaretteTax-aa/resources_news_html
Group defends low cigarette tax
By Feoshia Henderson
A coalition of tobacco trade organizations has come together to try to convince Frankfort officials to rethink plans to raise the state’s 3-cent cigarette tax.
Kentucky has the lowest cigarette tax in the nation at three cents a pack and Charlie Casper, chairman of Kentuckians Against Taxes, wants to keep it that way.
He said the Gov. Ernie Fletcher’s plan to raise the tax to as high as 53 cents by 2007 would devastate businesses like his that draw business from border states with higher tobacco taxes.
“People come into Kentucky to buy their cigarettes and they also buy their gasoline, their groceries, come to our restaurants and also do other shopping,” said Casper, who owns a wholesale tobacco business in Elizabethtown. “If you have the advantage, then stay with it and keep earning the money that you’re earning,”
The group has started a limited media campaign, running ads in newspapers in Louisville, Frankfort and some communities along the Tennessee border. The group is working to fund more ads across the state in the next four days, including in Northern Kentucky. In addition, Casper plans to make his case on talk radio stations across the state.
Kentuckians Against Taxes formed last month, according to records from the secretary of state’s office. Casper said the group is primarily made up of members of the Kentucky Grocer’s Association, the Kentucky Tobacco and Candy Association and the Kentucky Association of Tobacco Outlets.
Kentuckians Against Taxes will have to counter the messages of health groups lobbying hard to raise the tax as a way to cut teen smoking rates.
Casper is scheduled to speak against the increase today during a House Appropriations and Revenue Committee meeting where the plan will be discussed.
He said the organization also will be encouraging its members to lobby against the tax during the General Assembly session.
Barbara Fortman, manager of Hoby’s Cigarettes Beer and Tobacco in Covington, said if the cigarette tax were raised to 53 cents, it would likely drive her store out of business.
“If it were raised that much business would drop — and people would be out of jobs,” she said.
The store is located at Fourth and Philadelphia streets, near the Clay Wade Bailey and Brent Spence bridges, which connect Covington to Cincinnati.
Fortman, who lives across the river in Western Hills, estimated that about 75 percent of the store’s customers cross the river to buy not only smokes, but also beer, soda and chips.
A spokeswoman for Fletcher said the governor did consider border businesses when he put together the tax proposal.
“That is why in his JOBS For Kentucky plan, a 31 cent surtax would be placed on cigarettes, and then that amount would possibly increase in future years to ensure that the Commonwealth always maintains at least a 10 percent competitive advantage over the border states where sales occur,” spokeswoman Jeanne Lausche said.
Fletcher’s proposed a graduated cigarette tax increase that would raise the tax to 34 cents in 2005, 41 cents in 2006 and 53 cents in 2007.
The surtax would be limited to 90 percent of the competitive rate.
Publication Date: 02-10-2005
http://www.kypost.com/2005/02/10/kats02-10-2005.html
Anti-tax group holding Fletcher’s feet to the fire
February 14, 2005
By Ryan Alessi
HERALD-LEADER FRANKFORT BUREAU
Earlier this month, several lawmakers found themselves at odds with a Washington-based anti-tax group for trying to disavow “no-tax-increase” pledges they’d signed.
Now the heat’s on Gov. Ernie Fletcher and he’s still a believer.
Americans for Tax Reform, run by small-government advocate Grover Norquist, has unexpectedly questioned Fletcher’s tax proposal, which had been carefully crafted to do just what Norquist says he wants. It wouldn’t raise the overall tax burden on Kentuckians — or at least that’s the way Fletcher sees it.
But in a letter, ATR’s chief of staff has warned the governor that the group isn’t so sure. ATR thinks the plan may violate the no-tax-increase pledge that Fletcher signed in 2003 as he ran for governor.
So far, Fletcher downplays the letter, calling it “a request for clarification.” Caught on a Capitol stairway last week, Fletcher dismissed the issue: “I’m not concerned. Everybody’s entitled to their own opinion.”
But ATR’s Norquist isn’t just an “everybody” when it comes to taxes, and Fletcher might not get off the hook so easily.
“The governor is in a real difficult spot,” suggested Sen. Tom Buford, a fellow Republican from Nicholasville. Norquist isn’t a guy Fletcher needs as an enemy if he dreams of a second term in 2007, Buford says.
“He’s built himself a name,” Buford said of Norquist. “He’s made headway through all those different states. And when he gave the governor his support (for Fletcher’s tax plan) last time, but doesn’t this time, I think that hurts.”
Indeed, Norquist has a record of biting those who stray. ATR is currently waging campaigns against Virginia lawmakers who voted for a tax increase advanced by Gov. Mark Warner last year.
The group’s Web site prominently pictures “Virginia’s Least Wanted” — the 34 Republican lawmakers who backed their governor. Warner, a Democrat, is also shown.
More immediately, ATR’s ire could hurt Fletcher’s chances of getting his tax plan through the General Assembly, where 45 of the 138 members still consider themselves on Norquist’s pledge list.
Some Fletcher aides are hopeful that they can avoid political damage by persuading Norquist’s group that the governor’s plan really does meet ATR’s requirement of being “revenue neutral.” That means revenue from tax increases is balanced out with cuts in other areas.
In general, the governor’s proposal would raise levies on cigarettes, alcohol and satellite television, while cutting personal income taxes and restructuring business taxes.
Damon Ansell, ATR’s chief of staff, warned in his letter to Fletcher’s staff that the plan might not be “revenue neutral” as advertised, largely because in its current form the cigarette tax would rise automatically over time as surrounding states increase their cigarette taxes.
“This is a recipe for a large and continuing tax increase,” Ansell wrote.
Ansell said Friday afternoon that he hasn’t yet heard from Fletcher’s office.
Daniel Groves, senior advisor to the governor, said he’s still working on getting back to them. But he said he’s not worried because he’s been dealing with ATR about Fletcher’s tax plan since last year.
Still, says Rep. Scott Brinkman, a Louisville Republican and one of Fletcher’s key allies in the House, Fletcher must walk a fine line. As the state’s leader, he’s charged with doing what’s best for its people. As a politician, he must be mindful of his promises.
“Ultimately it’s his decision. He’ll have to balance his pledge with the legitimate needs of the people of Kentucky,” Brinkman said.
If diplomacy breaks down, administration officials are preparing Plan B.
Stealing a line from Norquist himself, Fletcher’s budget director Brad Cowgill notes that the governor made his pledge to Kentuckians — not to Americans for Tax Reform. So they should be the ones to determine who’s right.
“They will have to decide whether the governor has fulfilled his promise or not,” Cowgill said. “And I think ultimately they will come to the conclusion that he has.”
Reach Ryan Alessi at (859) 231-1303 or 1-800-950-6397, Ext. 1303, or ralessi@herald-leader.com.
http://www.kentucky.com/
