Over the protests of the alcoholic beverage industry, legislation raising alcohol and cigarette taxes in Kentucky is moving quickly through the 2009 General Assembly. Keeping track of the revenue bill’s progress is Kentucky Public Radio’s Tony McVeigh.
In his State of the Commonwealth address last week, Governor Steve Beshear made a new pitch for a 70-cent increase in the state’s cigarette tax. He says the administration has already trimmed $430 million from the budget this fiscal year, and he fears further cuts will send the state into a downward spiral.
“Kentuckians are not anti-tax. They are anti-unnecessary taxes,” he said.
But House and Senate leaders doubted they could get that big of a cigarette tax hike through the General Assembly. In closed-door negotiations, they agreed to seek a 30-cent per pack increase in the cigarette tax, plus a six-percent tax on alcoholic beverages at the retail level.
The proposal drew immediate fire from alcoholic beverage industry representatives, like Maker’s Mark President Bill Samuels. “If we weren’t taxed at the upper echelon of all the states, I personally would say, we need to pay our fair share,” Samuels said.
Among those testifying at the tax plan’s first hearing before the House Appropriations and Revenue committee was Don Berg of Brown-Forman Corporation. He warned committee members the Louisville-based company would not look favorably on the tax hike.
“It’s just only natural that as the state becomes increasingly more hostile towards our industry, that we have to ask, in some of these long-term investments that we’re making into the future, is this the right place to be looking at?” said Berg.
When the roll call began, Republican Rep. Jimmy Higdon was among lawmakers voting against the tax plan. Noting that the Maker’s Mark distillery is located in his Marion County district, he urged lawmakers to look elsewhere for answers to the state’s almost half-billion dollar budget deficit. “Instead of picking on two industries in Kentucky to raise the funds we need to get through this crisis, I, too, would echo what Rep. Graham said, and would call for a one percent increase in the sales tax,” Higdon said.
But the committee vote in favor of the tax plan was 19-9. Among supporters was former House budget chairman Harry Moberly, who says he understands beverage industry concerns, but doubts the tax hike will hurt business. “People are used to paying six cents for water, for soft drinks,” Moberly said, “and I would be very surprised if there’s one person who fails to buy a fifth of Maker’s Mark or a six pack of beer because they have to pay sales tax on it.”
While the committee was voting to raise alcohol taxes, beer and bourbon delivery trucks kept circling the State Capitol. Driving a blue and white, big rig with Bud Light emblazoned on the side was Lynn Beech of Kentucky Eagle distributors in Lexington.
“Trying to get ‘em not to raise taxes on the beer,” Beech said.
Reporter: “You know they already voted to do that in the House budget committee.” Beech: “Yes, they sure did.”
Reporter: “Do you think your protest isn’t having an effect?”
Beech: “I think it actually did on a few of ’em, and we’re hoping to take it on over to the Senate and all that and they’ll vote no for it.”
But first, the bill needs a House floor vote. And it needs 60 votes to pass. Democrats control the House 65-35, but their leaders admit they likely will need some Republican votes. Will they get any help from Republican Rep. Tim Moore of Elizabethtown?
“If and when, I have determined and believe that all possible cuts have been made to the budget, then I would consider other alternatives,” Moore said.
If the measure clears the House, it will get a Senate vote on Friday. If it passes there, Governor Beshear could sign the bill into law as early as Friday night. Collection of the new taxes would begin soon thereafter.