Ky. House approves cigarette tax hike to combat budget woes

(Editor’s Note: NKU’s Board of Regents traveled to Frankfort March 12. Read more here.)

Kentucky’s House of Representatives approved a proposal to raise the cigarette tax by 25 cents a pack March 12, which, when combined with cost-saving plans, would net $800 million over the next two years.

This would also ensure that the Commonwealth’s universities would get an additional $263 million, offsetting Gov. Steve Beshear’s proposed 12 percent cuts to education.

The plan also calls for adjusting the state’s “floating” gas tax quarterly rather than yearly -more quickly raising state revenue as fuel prices increase.

Smokers would pay an additional $200 million for cigarettes over the next two years under the plan that passed 50-45 on Wednesday. The money would be used to help the state cope with a projected $900 million financial shortfall.

The plan also calls for higher taxes on other tobacco products and a variety of business services to generate an additional $95 million.

One of the largest of those provisions calls for restructuring and refinancing general fund debts to save about $300 million over two years.

House Appropriations and Revenue Committee Chairman Harry Moberly, D-Richmond, said the plan calls for eliminating the positions of more than 3,000 state employees expected to retire by year’s end. That move, Moberly said, would save about $85 million a year.

The additional revenue created under the measure will be used across state government, particularly in education and human services. Teachers would get a 4 percent pay raise over two years at an additional cost of $195 million.

About $130 million of the money would fund health and human service programs, such as Medicaid, which provides medical care to the elderly and poor.

The proposed tax hikes faced lengthy debate from the House floor.

“It’s my belief that we don’t have a revenue problem in Kentucky,” said state Rep. Jim DeCesare, R-Bowling Green. “We have a spending problem.”

State Rep. Jim Wayne, D-Louisville, the sponsor of the tax legislation, said the money that would be generated is desperately needed. He said that without the additional revenue, government services would have to be cut.

“It’s certainly not a perfect bill,” Wayne said, “but it is responsible and fair.