Stateline Story

To Raise Revenue, Raise Tobacco Taxes, Kentucky Commission Says

Kentucky may soon tell its smokers to cough up some extra cash.

The state's Blue Ribbon Commission on Tax Reform says the state should raise taxes on tobacco. The governor-appointed panel Monday (November 19) recommended the state increase its cigarette tax from 60 cents to $1 per pack, along with a proportional hike on other forms of tobacco, The Lexington Herald-Leader reports.

The move would raise an estimated $120 million in revenue and presumably help the state address its high smoking rate, cutting down on long-run health care costs.

In 2011, about 29 percent of Kentuckians said they were smokers, according to surveys by Gallup and Healthways. That was first in the nation. Kentucky is also a national leader in prevalence of diabetes and lung cancer — diseases that correlate to rates of smoking.

Many states, pressed by public health advocates, have sought to combat high smoking rates by raising taxes on tobacco, which range as high as $4.35 per pack of cigarettes in New York. Several studies have shown the method works, particularly in curbing youth smoking.

Kentucky's current cigarette tax is among the lowest in the nation. Only 10 states are lower. That includes neighboring Missouri, where voters this year narrowly defeated a ballot measure that would have increased its 17 cent tax, is easier on cigarette smokers. Missouri has the second-highest smoking rate. 

Addressing taxes on tobacco is just one of many areas of Kentucky's Blue Ribbon Commission has examined in completing its daunting assignment from Governor Steve Beshear: help lawmakers overhaul an outmoded tax code that hasn't been touched for decades.

As Stateline has reported, Kentucky's tax revenue hasn't kept up with its changing economy, a trend expected to continue in the coming years, leaving the state with a structural deficit that could force major cuts to services. If unaddressed, that gap is expected to reach $1 billion by 2020, according to a report commissioned by the state.  Lawmakers have studied the problem for more than 10 years, but done little to address it.

Also on Monday, the commission recommended pursuing a constitutional amendment that would enable cities to adopt a local sales tax for limited periods of time, the Herald-Leader reports. It's something local officials have long requested.

Meanwhile, the commission rejected the idea of raising the state's 6 percent sales tax, but recommended raising a tax on utilities receipts for homeowners and business owners. The commission has also recommended changing the way pensions and social security are taxed.

It will be up to the Governor and lawmakers to decide which recommendations to push in the coming session.