House passes 300+ page tax bill despite little time to review
When the Kentucky legislature sells out public health, we often blame loyalty to tobacco farmers. But this year the legislature sold out farmers too.
On July 1, Kentucky's excise tax on cigarettes will rise by 50 cents a pack. The excise tax on electronic cigarettes will remain the same: Zero.
This is a win for tobacco giant Altria, which outspent everyone lobbying the legislature this year, and its spinoff Philip Morris International, which has ambitious plans to replace cigarettes with safer "smoke-free products."
Cigarette makers are reinventing themselves as purveyors of no-burn nicotine-delivery devices, which require very little tobacco to manufacture. If PMI achieves its "future beyond cigarettes," tobacco farming's already dim future will be even dimmer.
Buyers of e-cigs, which are more popular with teens than adults, pay the 6 percent sales tax in Kentucky, while smokers will be paying more than an additional $100 million a year, as a result of recent legislative action.
The cigarette tax increase is not expected to make much of a dent in smoking rates in the state that suffers the nation's highest death rate from cancer.
State economists predict about a 2.5 percent drop in cigarette sales. Kentuckians are expected to buy 7.5 million fewer packs. The decline in sales to people from other states will be far greater: an estimated 55 million packs.
As of July 1, Kentucky's cigarette tax ($1.10) will be higher than that of Tennessee (62 cents) and Indiana (99.5 cents) but still lower than in Ohio, West Virginia and Illinois. Missouri has the nation's lowest at 17 cents. The average state cigarette tax is $1.73 a pack.
Demand for cigarettes is inelastic; it holds despite price increases. Another word for that is addiction. Demand is elastic among young people, who do respond to cigarette price increases. To have an impact, however, the price increase must be steep enough that it can't be neutralized by discounts from wholesalers and retailers.
Health advocates pleaded for a $1 increase, which would have a public health impact. We don't know what went into the decision to raise the cigarette tax by just 50 cents and leave the tax on e-cigs unchanged because the 300-plus page tax bill was put together behind closed doors and received no public vetting, other than a few hours of floor debate.
We do know, thanks to reporting by Tom Loftus of the Courier Journal, that during the secret tax talks, top Republican lawmakers met with John Rainey, Altria's director of government relations for state government affairs.
Altria reported spending $379,760 to lobby the 2018 session, more than double what any other company or organization spent and more than the bankers, teachers, doctors, hospitals and coal associations combined. The Richmond, Va.-based company no doubt considers it money well spent.
Altria hopes to soon be marketing IQOS, an e-cig that contains highly concentrated tobacco, not liquid nicotine like most e-cigs. The amount of tobacco is so small that, experts say, IQOS won't make any difference for tobacco growers.
Research suggests that replacing cigarettes with e-cigs is safer for adult smokers, but e-cigs are a gateway to smoking for kids. E-cigs certainly are competition for tobacco, making it odd that the supposedly pro-farmer Republicans who control the legislature left e-cigs untaxed when the legislature was so desperate for money that it taxed gym memberships, which are indisputably good for health, and taking your dog to the vet.
As the Bevin administration insists 95,000 people must be cut from Medicaid to save money, the legislature vaporizes in the face of Kentucky's public health enemy No. 1.