House passes tax increases

The Kentucky House approved doubling the tax on tobacco products and applying the 6 percent sales tax to alcohol in a 66 to 34 vote Wednesday that split largely along party lines.

The measure, which was in doubt as late as Tuesday afternoon, received wide support from Democrats, including some of the more liberal House lawmakers who had threatened to oppose it because they said it didn’t go far enough to address Kentucky’s long-term budget woes.

In the end, the House Bill 144 received more than the necessary 60 votes needed to pass a revenue measure in the House during odd-year sessions. The governor and legislative leaders spent the last 72 hours engaging in heavy-duty lobbying of lawmakers to secure enough support for the plan to pass. Six Republicans supported the proposal.

The state faces a $456.1 million budget shortfall this fiscal year, which ends June 30. Putting the sales tax on beer, wine and liquor, which currently are taxed only on the wholesale level and not at the cash register, would raise $10 million in May and June. And raising the cigarette tax from 30 cents per pack to 60 cents, as well as doubling the levies on chewing tobacco and snuff, raises another $42 million.

“Let me assure you, without this revenue, the budget situation is dire,” said Rep. Rick Rand, D-Beford, the budget chairman.

The rest of the budget hole will be filled by $219 million from the state’s rainy day fund and other money transferred from other accounts in state government. Gov. Steve Beshear also would have to cut $137 million from state agencies, while another $10 million would come from the judicial and legislative branches. Those provisions were included in House Bill 143, which cleared the House in a 77-23 vote Wednesday.

Key programs, such as the state’s corrections department, the Medicaid program that provides health care for poor and disabled Kentuckians and Kentucky’s school funding formula, wouldn’t be cut, according to the plan. Public universities would see 2 percent trims rather than 4 percent cuts most other agencies will have to absorb.

Gov. Steve Beshear spent much of Tuesday night and Wednesday meeting with lawmakers and urging them to support the bill. In some cases, he pledged to get lawmakers together in the coming months to look at crafting a broader reform of the state’s tax system that has come under fire from both the political left and right.

One of the harshest critics of the plan to address the shortfall, Rep. Jim Wayne, D-Louisville, called the measure a “horrible bill” during his floor speech Wednesday. He lambasted it for trying to address a deep problem by shifting money around and applying an “unfair” tax on alcohol. But he asked House Speaker Greg Stumbo, D-Prestonsburg, whether he will publicly commit, as Beshear has, to look at broader tax reforms.

“The chair is committed to that concept,” Stumbo replied.

That was enough to seal the deal for Wayne, who voted “Yes.”

During a floor debate that lasted more than an hour, Rep. Stan Lee, R-Lexington, criticized the plan for being hastily pushed through the process as well as for adding taxes during a recession.

“Raising taxes in a time of a bad economy is not good public policy,” he said, adding that he’s also concerned that this will be the first of a series of tax increases to plug future budget holes.

Rep. Brad Montell, R-Shelbyville, said more should have been done to comb through the budget to find and cut out programs the state can live without before asking lawmakers to increase taxes.

“I was disappointed that it seems we’re back to the same old, same old,” he said. “I find myself frustrated that there’s nothing to point to and say we’re changing policy in Frankfort.”

Just like Tuesday, when the tax bill passed through the House budget committee, Rep. Harry Moberly, D-Richmond, provided the fiercest defense of the plan, although he, too, conceded it was a short-term fix.

“We need this stop-gap measure or else the schools are going to have to cut drastically,” said Moberly, a former budget committee chairman. “And we’re going to go backwards in education and the state just can’t afford that.”

He said the tax increases on cigarettes and alcohol aren’t on necessities. “These are things that are voluntary,” he said.

Legislative leaders from the Senate and House worked over the last week to craft the current compromise budget plan. They slashed Beshear’s initial proposal for a 70-cent cigarette tax to 30 cents and added the alcohol tax.

“It may not be perfect,” Stumbo said in a speech on the floor before the vote. “It is just a first step. It is a begining, but a very, very significant beginning.”

Six Republicans joined the majority of Democrats to support the revenue bill, including Floor Leader Jeff Hoover of Jamestown, Rep. Bob DeWeese of Louisville, Rep. Charlie Siler of Corbin, Jim Steward of Flat Lick, Danny Ford of Mt. Vernon and Rep. Lonnie Napier of Lancaster.

The budget measure now heads to the Senate, where Senate President David Williams, R-Burkesville, has pledged his support and said he expects it to pass.

- Ryan Alessi and Jack Brammer

Filed Under: Featured • Greg Stumbo • KY General Assembly • State Budget • State Government