Tobacco, Alcohol Tax Narrowly Passes Senate

Feb 14th, 2009

From LRC News Release

A package to cut state spending and increase revenue to address a $456 million deficit narrowly passed the Senate on Friday, February 13. House Bill 144, the tax portion of the plan, passed 24-12 vote, one more vote than constitutionally necessary. HB 143, concerning the revenue cuts, passed 35-1.

The tax plan increase the tax on cigarettes by 30 cents and subjects retail package sales of alcoholic beverages to the state’s 6 percent sales tax. Under the plan, cigarettes would be taxed at 60 cents per pack, while snuff would be taxed at 19 cents per tin and other products would see a 15 percent wholesale tax. Alcohol is currently taxed at an 11 percent wholesale rate, but is exempt from the retail tax. Both increases would begin on April 1.

Most state agencies, including the legislative and judicial branches, will see their budgets trimmed by 4 percent. Colleges and universities will be cut two percent, while Medicaid, corrections, and P-12 education’s SEEK funding will not be reduced. Local economic development funding, including coal severance receipts, will also be protected from the cuts and transfers.

“Cuts of a half billion dollars have already been made, with more to come,” said Sen. Charlie Borders, R-Russell. “The road is not going to get better any time soon.” The lengthy debate — more than half of all senators rose to speak — centered on the need for a more comprehensive look at the tax structure in the future. “This is a stopgap measure, and that’s OK,” said Senate President David Williams. “We’ve set the stage for a new day.”

Sen. Tim Shaughnessy, D-Louisville, said the vote was simply a preview of what lies ahead. “This is the easy part,” he said. “The real difficulty will come in the next biennium.”

Criticism of the tax package focused on the targeted items. “My problem is with the equity and fairness,” said Sen. Julian Carroll, D-Frankfort. “I came here prepared to vote for a tax, but not this tax.”

Sen. Julie Denton, R-Louisville, pointed out that alcohol is not sold everywhere in the state. “It’s targeting the big counties that happen to be wet,” she said. “This is a 120-county problem that we’re strapping to the backs of 30 counties.”

The bill will also allow the governor to make use of any emergency funding passed by Congress. “I can only hope the stimulus package … will add some help to our state’s situation,” said Sen. David Boswell, D-Owensboro.

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