Smokers, Businesses Could Face Higher Taxes In Kentucky

FRANKFORT, Ky. (AP) - Smokers and businesses would shoulder much of the burden for balancing Kentucky's budget over the next two
years under tax increases approved by a legislative committee on
Tuesday.
The House Appropriations and Revenue Committee voted 20-9 to
raise the state's cigarette tax by 25 cents a pack - a move that is
expected to generate nearly $200 million over the next two years to
help erase a projected $900 million budget deficit over the
two-year budget cycle that begins on July 1.
Other tobacco products also would also be taxed at higher rates,
as would air charters, armored car services, security services,
commercial janitorial services and linen services. Combined, those
taxes would generate an additional $95 million.
Budget committee Chairman Harry Moberly, D-Richmond, said the
increased taxes coupled with cost-saving provisions would generate
some $800 million over the next two years. One of the largest of
those provisions calls for restructuring and refinancing general
fund debts at lower interest rates, saving about $300 million over
two years.
Moberly said the House plan also calls for downsizing state
government by not filling job vacancies when employees retire and
for recalculating the state's "floating" gas tax quarterly rather
than yearly - a move that would more quickly raise state revenue as
fuel prices increase.
"If we don't pass this, I think the effect on the commonwealth
will be devastating," Moberly told lawmakers gathered in a crowded
legislative office building next door to the Capitol.
The legislation that contains the tax increases to balance the
state's $18.6 billion budget now goes to the full House for
consideration. The budget bill also passed the committee on Tuesday
and goes to the House.
"There will be political fallout from this for people who
support it," said state Rep. Jim Wayne, D-Louisville, who voted
for the measure. "There is no other alternative that is realistic
that can pass the House."
The additional revenue created under the measure will be used
across state government, particularly in education and human
services.
Moberly said teachers would get a 4 percent pay raise over two
years at an additional cost of $195 million. Universities, he said,
would get $263 million, which would allow them to maintain current
programs without the threat of cuts.
About $130 million of the money generated would go to a variety
of health and human service programs, including Medicaid, which
provides medical care to the elderly and poor.
State Rep. Jimmie Lee, D-Elizabethtown, said he voted for the
taxes despite having two opponents in this year's legislative
elections.
"It's really difficult," he said, "to be an advocate for
education, an advocate for those who can't speak for themselves,
and then vote no today."
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The legislation is House Bill 262.

(Copyright 2008 by The Associated Press. All Rights Reserved.)


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