An analyst from the Tax Foundation said raising the state cigarette tax is the wrong approach to creating new revenue in Kentucky. The Kentucky House passed a 50 cent cigarette tax hike last week as part of a two-year budget bill.
The Tax Foundation said Kentucky’s 2009 cigarette tax increase provided an initial boost in revenue, followed by a significant decline in the following years. Morgan Scarboro with the Tax Foundation said cigarette tax revenues are a volatile and unreliable source of revenue.
“There are responsible ways to raise that revenue and there are irresponsible ways to raise that revenue,” she said. “I would say the increase in the cigarette tax in Kentucky is an irresponsible way to raise that revenue.”
Scarboro said Kentucky needs tax reform, not a higher cigarette tax. She added a good tax code is neutral and doesn’t try to influence an individual’s behavior or rely heavily on any one industry. Scarboro said an unintended consequence of increasing cigarette taxes is that people can purchase tobacco products in neighboring states like Tennessee and Virginia, which have lower cigarette taxes.