Tuesday, February 10, 2009

Questioning the mad rush to raise taxes

Andy Hightower at the Kentucky Club for Growth suggests the hand-wringing about the state budget "shortfall" may be off base by almost $200 million.

"Let's say January is a precursor and state revenues remain down 4% for the next five months," Hightower wrote. "That would leave the state with a $277 million shortfall, only 60% of the prediction."

He also said some of those pushing for tax increases may be discounting the effect bad weather had on business activity in January.

"This is not to say there would not have been a decline, only that the freeze froze commerce to a significant degree, which was reflected in revenue numbers," Hightower said. "One only need look at the thaw this weekend when people were shopping like Christmas to have a sense of the truth here."

Another point to be brought out from the latest budget numbers is that cigarette tax revenues were down 22% in January from January 2008. Kentucky is already down over $7 million in cigarette tax revenue for the fiscal year. That's before the tax increase.

Food for thought, perhaps?

2 comments:

Patrick said...

I think the tobacco tax being off $7 million is a good thing. That means our smoking rates are declining. Kentucky spend $487,000,000 last year in Medicaid expenses DIRECTLY related to smoking.

As business leaders know, KY's health coverage expenses see double digit rate increases annually.

We have the highest smoking rate in the nation and the 4th lowest tax. Let's leave the liquor alone and tax the product that weighs us all down in the long run with health expenses.

David Adams said...

Patrick,

As a nonsmoker with no personal financial interest in the tobacco industry, I'm not concerned at all about anyone's desire to run the whole tobacco industry into the ground. But our state government leaders, in their infinite wisdom, have chosen to base too many of their spending decisions on many years of increasing tobacco tax revenues. They want your vote if you support tax increases, but they have no interest in your opinion if what you want is for their revenue to dry up. No one -- least of all me -- fails to see the wisdom in limiting smoking. But the politicians are playing you for a sucker so they can keep spending more and more money.