Today in the House we should be voting on a package that will raise taxes on some Kentuckians to help cover a large budget deficit. If it passes, the Senate will vote on Friday.
As you know, tax revenues for the state (all states, for that matter) are down and the 19 billion dollar (two-year) budget that we passed last year cannot be paid for. Therefore, Governor Steve Beshear has to cut spending. We can’t run a deficit, like the Federal government.
He has already directed about 4% in cuts for the current fiscal year. He needs to make additional spending cuts of between 4 and 7%. To keep that number as low as possible he’s asked the General Assembly to authorize new taxes that will bring in another 100 million this year, more in the second year of this budget. To accomplish this Beshear suggests that we raise cigarette taxes by 70 cents per pack.
In polling, about 75% of the people think that would be okay. This roughly coincides with the number of people who don’t smoke. They wouldn’t have to pay any more taxes and think it would be just fine if somebody else did. One of the major arguments is that an additional 70 cents would reduce smoking, especially among teens, and so reduce our health care costs. They have all the statistics. They call it a “win-win.”
Then along comes the US Congress and they raise the federal tax on a pack of cigarettes by 61 cents. To accomplish the same smoking-reduction goals using their numbers, we’d only have to raise the Kentucky tax by another nine cents. But even the American Heart Association, which argued for the 70-cent tax increase, still wants another 70 cent tax increase. It’s not about health; it’s about the money.
The tobacco tax is regressive, meaning that it hits the poor more than others. Relying heavily on such a tax is unwise. If your goal is to tax everyone out of smoking, what happens when it works? No more money.
The proposal before the House is to raise the cigarette tax by 30 cents, and to add another 6% tax on liquor sales. Both ideas are job-killers. And folks from this area should realize that such a policy will hurt us here more than anywhere else in the state.
It’s not just distillery workers. Bourbon is an agricultural product right from the start. The list of those affected begins with farm supply stores, adds the farm families who plant and harvest the grains, folks that sell and maintain farm equipment, families who rely on distillery jobs, families who build storage facilities, drivers who distribute the product, and workers at retail outlets where the product is sold.
The Bourbon industry is unique to Kentucky; it’s considered our signature product, and has been the key to growth in tourism over the last twenty years. Our economy depends a great deal on the Bourbon industry. All those jobs are for families who spend their money mostly right here. The effect is multiplied as the money circulates through business after business: automotive, medical, insurance, real estate, restaurants, legal, banking, even newspapers. Our schools rely on money generated from property taxes on whiskey aging in barrels. Our churches are blessed by the tithes and offerings brought by families who work in this industry.
Some people – even legislators – think that we don’t tax the sale of alcohol, but this is not true. Before 1982, we taxed at the point of sale but a whole lot of beer went out the door without paying the sales tax. So Rep Kenny Rapier helped devise a system where the tax would be collected at the wholesale level. The rate was set at 9%, roughly equal to a 6% retail tax.
Then we moved against the liquor industry with higher taxes again in 2005. We raised the sales (wholesale) tax to 11%. I received over 1000 letters from individuals who work at local distilleries. And each was worried about his/her job.
The higher-tax people have convinced many that taxes simply must be raised. They say “We have to do something.” True, but that doesn’t necessarily mean that we have to raise taxes. We can cut spending, more. Our state has grown in population about 15% over the last twenty years, while our budget has grown by 300%. It’s difficult to cut or eliminate programs once begun; but if ever there was a time to do it, it is now.
In the military, at budget time, we would take all the programs we wanted and stack them up. We’d then peel them off one by one, and when the money was gone we’d stop the process. Those that were left didn’t get funded because we knew that there was only so much money. In a similar way, legislators and governors would better serve the people if we believed that there is only so much money. We shouldn’t keep going back to the people for more and more.
Hearing from you is the best part of my job. Send an email, or leave a message in Frankfort by calling 1-800-372-7181.
This Saturday is St Valentine’s Day and I’ll be at the Howardstown Mini-Mart at 10:00 a.m. I’ll buy the coffee, and hope to see you there.