Raising cigarette taxes is unfair to Kentucky adult smokers and businesses | Opinion

Gerald Stith | Opinion contributor

As a long-time Kentuckian and business owner, I appreciate our elected officials’ efforts in Frankfort to identify new revenues, close budget gaps and fund important government programs.

But large, targeted cigarette taxes rarely deliver the expected revenue and rely on a small group of Kentuckians – adult smokers – to pay more for government programs that benefit everyone. Having worked over 23 years in the retail consumer products industry, I’ve seen first-hand the unintended consequences tax increases can have on local businesses.

The most recent proposal would increase Kentucky’s tax on a pack of cigarettes by 50 cents, an 83 percent increase in the Kentucky cigarette tax – the largest in state history.

Consider this: 50-cent cigarette tax hike a political milestone but doesn't go far enough to fight cancer

When large tax increases occur, many smokers seek cheaper sources and purchase their cigarettes in lower tax jurisdictions. If Kentucky were to raise its tax by 50 cents, four neighboring states – Missouri, Indiana, Tennessee and Virginia – would all have lower cigarette prices.

This change in purchasing behavior would hit the 5,400 retailers in Kentucky like myself, particularly those close to the border who depend upon cigarette revenues to make payroll, pay business and property tax, and cover the other expenses with running a small business.

According to the National Association of Convenience Stores, cigarettes are the top revenue generator for convenience stores nationwide, accounting for 31 percent of all in-store sales. These small businesses like mine just won’t lose cigarette sales, but other sales like gas, food and lottery tickets.

Background: Plan would raise Kentucky's cigarette tax above $1 per pack to pay for education

Tobacco is also important to our farmers. For decades, Kentucky has been one of the top tobacco-growing states with a production value of over $390 million in 2017 according to the USDA. Tobacco is an important cash crop for farmers and their families, providing financial resources to help grow other crops such as soybeans and corn and pay farmworkers.

And then there’s the large amount of money the state already receives. Last year alone, Kentucky collected nearly $440 million from the sale of cigarettes. In Kentucky, tax-paid cigarettes sales have declined an average of 5 percent a year over the last decade. If this trend continues, the amount of revenue Kentucky hopes to collect from the proposed tax increase will also decline.

Our legislators need to find stable, long-term solutions to funding shortfalls and stop trying to fix the problem with large tax increases on the backs of cigarette smokers. This is unfair!

For all these reasons, I encourage legislators to find a more reliable revenue source and not raise cigarette taxes.



Gerald Stith is owner of JC's Cigarette Outlet in Shepherdsville, Kentucky.

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