Budget, tax bills pass committee

Amid calls for broader tax reform, members of the House Appropriations and Revenue Committee passed two bills this morning that would bring about $150 million in state budget cuts, use up to $219 million of the state’s “rainy day” budget fund and raise alcohol and tobacco taxes to help offset an anticipated budget shortfall this year of close to $500 million. 

The measure that would double the state’s cigarette tax to 60 cents per pack and make alcoholic beverage purchases subject to the state’s 6 percent sales tax passed 19 to 9 and will head to the full House for a vote on Wednesday. 

“If we don’t have this stop-gap measure for this half of a fiscal year, we are going to have cuts that this state can’t stand in education and human services. It’s that simple,” said Rep. Harry Moberly, a Richmond Democrat. “This is the only alternative that is available to us now to mitigate those drastic cuts.”

The vote came after testimony from the state’s distilleries and malt beverage distributors who warned that the tax would harm their industries and cost jobs. 

During and even after the vote, tractor trailers bearing the emblems of beer and liquor brands circled the Capitol, and the alcohol industry is planning a rally in the rotunda this afternoon when the House and Senate go into session

Mark Brown with Frankfort’s Buffalo Trace Distillery said other states were looking to Kentucky and would be more likely to approve additional alcohol taxes if Kentucky moves in that direction. 

“We’ve worked very hard in this state with no money from the state to build our business,” Brown told the committee. “This alcohol tax sends the wrong message to the wrong people at the wrong time.”

The budget bill authorizes Gov. Steve Beshear to make the cuts he recommended in his plan, which totaled about $150 million and preserved the level of SEEK funds that go to local school districts and funding for Medicaid. 

The plan goes further in the use of the state’s “rainy day” budget fund by using nearly all that the state has in reserve – up to $219 million. 

About $2.1 million from the state legislative branch’s budget will be used to help cover the shortfall as will $7.6 million from the judicial branch budget. 

About $50 million from the public employees health insurance trust fund would also be used to close the budget gap. 

In the area of tax increases, House Bill 144 increases the cigarette tax and doubles the tax rates for chewing tobacco and moist snuff. Through the end of the year, the increases are expected to generate an additional $38.8 million for the state. 

During the first full year after the increases, the state expects to see $81.5 million from the tobacco tax increases and $97.9 million from the alcohol tax increase.

In voting for House Bill 144, several lawmakers called for broader reforms while acknowledging that the increases are just a short-term solution. 

Those broader changes members said should be considered ranged from an increase in the state’s sales tax and taxing certain services. 

“We must change our tax code from a 20th-century tax code to a 21st-century way of dealing with how we raise revenue,” Rep. Brent Yonts, a Greenville Democrat, told the committee before voting for the bill. 

Both bills – House Bill 143 and House Bill 144 – head to the full House, where the must receive at least 60 votes in the 100-member chamber to pass.

Read Wednesday’s Messenger-Inquirer to learn more about Tuesday’s debate about the two bills.

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