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Top-10 Reasons to Vote ‘No’ to More Cigarette Taxes

10. Cigarettes don’t pay taxes. Kentucky smokers do!

In 2006, the 28.5 percent of adults who comprise Kentucky’s smoker population paid more than their fair share — more than $400 million — in taxes and tobacco-settlement payments because they chose to buy cigarettes. Isn’t $400 million enough tax revenue for a single legal product?

9. Those who can least afford it suffer the most harm.

In 2006, the median household income for Kentucky smokers was only $30,035, compared with $45,467s for nonsmokers. Nearly 43 percent of Kentucky smokers lived in households with incomes LESS THAN $25,000.

8. It unfairly singles out one legal product for regressive taxation.

Payments by Kentucky smokers in excise and sales taxes, and tobacco-settlement payments in fiscal year 2007 were: nearly five times as large as state excise taxes on alcoholic beverages, $85.7 million; nearly twice as large as coal-severance tax revenues, $222 million; and nearly eight times as large as telecommunication taxes, $51.6 million.

7. University students, exceptional children and the environment would suffer irreparable harm.

Kentucky’s smoker payments of $404 million were large enough to support fiscal year 2007 funding in the state budget for Kentucky Higher Education Assistance Authority, Exceptional Children’s Services, Public health, Career and Technical Education, Eastern Kentucky University and Environmental Protection.

6. Increased taxes threaten retailers.

Just a 25-cent tax increase could cause cigarette sales to fall by 65 million packs. Kentucky convenience stores would lose an average of nearly $75,000 in cigarette sales. Gross-profit losses would average about $13,000 per store.

5. Hundreds or even thousands of jobs could be lost.

A 25-cent tax increase could result in the loss of more than 900 Kentucky retail and wholesale jobs (based on projected gross-profit losses). More than 2,500 workers could face unemployment if cigarette taxes get raised by 75 cents.

4. Kentucky’s economy would suffer.

Raising cigarette taxes would result in Kentucky losing one of its few economically competitive advantages with surrounding states. Smokers from neighboring states streamed into Kentucky when surrounding states implemented hefty tax hikes in 2002 and 2003. During that time, sales of cigarettes in Kentucky increased by 146 million packs, which translated into $30 million in additional sales and excise tax revenue for state government.

However, the 27-cent-per-pack hike in 2006 resulted in a decrease of 121 million packs in fiscal year 2007. Another tax increase likely would cause this revenue stream to dry up – which is not what most lawmakers want.

3. It’s a temporary Band-Aid for the state’s fiscal problems.

Raising cigarette taxes won’t solve the state’s long-term fiscal problems. The basis of those problems is excessive spending. It’s time to end “painful” tax increases and start the less “painful” budget cuts.

Many put forward the premise that taxing cigarettes creates a way to fund the public health-care expenditures that smokers cause. That’s a clumsy way to deal with the problem. If smokers generate health-care expenses, why not just make them pay for the health care? Naturally, this would mean their insurance pays, but they buy the insurance. This would eliminate the need for cumbersome state intervention.

2. Education is more effective.

The Centers for Disease Control recommended that Kentucky spend $25 million this fiscal year on tobacco-prevention campaigns. However, Kentucky plans to spend less than 10 percent of that — only $2.5 million of the $297 million in tobacco-generated revenue collected by the state.

How many billboards, public-service announcements and education programs could be created and produced if Kentucky would just use its existing tobacco-generated revenue for tobacco prevention as the CDC recommends? Wouldn’t showing Kentucky children pictures of their “Lungs on Nicotine” do more to prevent tobacco use than the force of government taxation? Don’t say it wouldn’t until you try.

1. It violates the pledge of ‘No New Taxes.’

Many lawmakers signed a pledge not to vote for new taxes.

Keeping that pledge could help restore some of the public’s confidence in government. Breaking that promise could cause their re-election chances to go up in smoke.

– For interview information, please contact Jim Waters, director of policy and communications for the Bluegrass Institute. He can be reached at 270-782-2140 or jwaters@bipps.org.

The Bluegrass Institute is an independent research and educational institution offering free-market solutions to Kentucky's most pressing problems.

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