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Kentucky Gov. Beshear Proposes Tax Hike on Cigarettes to Cover Overspending Problem


Posted by Kelly William Cobb on Friday, December 12th, 2008, 12:00 PM PERMALINK


Kentucky Governor Steve Beshear has proposed a massive tax hike on cigarette consumers.  In response, ATR sent a letter to all Kentucky Taxpayer Protection Pledge signers urging their opposition to the Governor's proposal.  Click here to read the letter.

Below is ATR's press release on the Kentucky tobacco tax.

Facing $456 million in government overspending this year, Kentucky Gov. Steve Beshear (D) yesterday called on the legislature to adopt a 70-cent per pack tax hike on cigarettes in the upcoming legislative session. If passed, the measure would raise the cost of an average pack of cigarettes to over $4.50 and double the tax charged on other tobacco products.
 
According to Gov. Beshear’s office, the tobacco tax is estimated to generate $81.5 million for the state. The Governor’s statement calls these tax hikes are a “reliable source of revenue” that are more predictable than other revenue sources. However, of the 57 tobacco tax increases around the country between 2003 and 2007, very few actually met targets for anticipated revenue. For example, New Jersey raised the cigarette tax just 17.5 cents in 2007 expecting to bring in an additional $30 million. In actuality, the state lost $22 million in tax revenue from tobacco consumers, contributing the current $1.2 billion deficit.
 
“Evidence from nearly every state that has unfairly targeted smokers to solve self-inflicted budget problems completely contradicts Governor Beshear’s claim that cigarette taxes bring in more revenue,” said Grover Norquist, president of Americans for Tax Reform. “The talking points Governor Beshear received from coercive utopian health advocacy groups are baseless and completely disconnected from real world data.”
 
The Governor’s proposed tax hike would also push Kentucky’s tobacco tax to $1.00 per pack; well beyond Kentucky’s neighboring states, which average 69.5-cents per pack. In a similar situation, Maryland doubled the cigarette tax last year to cover a budget projection shortfall. However, cigarette sales dropped nearly 25%, failing to fix the state’s budget woes, after consumers drove to nearby states with lower tax rates.
 
“Such a substantial increase in tobacco taxes will only drive consumers to surrounding states with lower tax rates and increase the smuggling of cigarettes across state lines,” added Norquist. “The Governor should understand that the single worst way to solve the state’s overspending problem is to send consumers to pay taxes elsewhere.”
 
For a PDF version of the press release, click here.

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