Ky. legislators mull cigarette tax hike of 40 cents or more as way to close deal on budget, pensions; top Philip Morris lobbyist visits

Kentucky Health News

FRANKFORT, Ky. – As legislators scrambled to meet a deadline to pass a budget they can protect from the governor's line-item vetoes, they revived the idea of a higher cigarette tax -- but perhaps less than the 50 cents-a-pack increase passed by the House with its version of the budget.

That brought the top state-government lobbyist for the nation's largest tobacco company to Frankfort, and renewed pleas by advocates of a $1 increase that only such a large hike would make a real difference in Kentucky's smoking rate, second in the nation. They did that in response to talk of a 40-cent boost, which would make the tax $1 a pack, still well below the national average of $1.72.

The Coalition for a Smoke-Free Tomorrow argued afresh that unless the price goes up by at least $1, tobacco companies can keep smokers hooked by giving discounts to retailers and coupons to consumers, then gradually raising prices. The coalition said a $1 boost could be "the most significant and proven health-improvement measure the General Assembly could enact in their lifetimes."

Altria VP John Rainey
(Va. Public Access Project photo)

Top legislative leaders met separately Wednesday with John Rainey, director of state-government relations for Altria Group, the parent company of Philip Morris USA, U.S. Smokeless Tobacco Co. and other tobacco firms, Tom Loftus of the Louisville Courier Journal revealed.

The accounts by Senate President Robert Stivers and acting House Speaker David Osborne indicated that Altria can live with a 40- or 50-cent increase, but wants to make sure that it is limited to cigarettes, as the House bill did. The last hike, in 2009, applied to all tobacco products.

"They're interested in different components of the tax code, including what might happen with the cigarette tax, e-cigarettes, smokeless [and] products that haven't even been marketed," Stivers told Loftus. Altria has invested heavily in electronic cigarettes and is planning to introduce a "heat not burn" nicotine-delivery device.

House Majority Leader Jonathan Shell, who also met with Rainey, said "Tobacco taxes are just part of the conversation we're having."

Osborne told Loftus that an Altria lobbyist "was here to talk about a facility they own in Western Kentucky and just wanted to give his opinions on things and a perspective on how that impacts them," Osborne said. Altria's U.S. Smokeless plant in Hopkinsville uses the area's dark-fired tobacco.

Loftus noted that Altria spent $156,650 lobbying the legislature in the first two months of the session, "far more" than any other lobby, "but the second-largest spender on lobbying for the first two months of the session was a group on the other side of the tobacco-tax debate – the Foundation for a Healthy Kentucky, which reported spending $107,336 during the two months." The foundation staffs the smoke-free coalition.

The Senate initially rejected the House's tax plan, but now it and the budget appear to be the secodn step of "a grand bargain" that helped pass a surprise pension-reform bill Friday, Loftus reports: "The House accepts a pension bill, the Senate accepts some kind of tax increase — which would be styled as 'tax reform' by all who vote for it. Bottom line: The 2018-20 state budget would have enough revenue to fund education along the lines of the House plan while also addressing the needs of the state's beleaguered pension plans."

The House and Senate did not meet Friday. They are set to meet Monday, the last day they can pass a budget and still have time to override any line-item vetoes issued by Gov. Matt Bevin, who has 10 says (not counting Sundays) to act on bills once he gets them. The last day the General Assembly can meet this year is Saturday, April 14.