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Kentucky Retailers Hit By Tax Hike

Discount tobacco stores near the Tennessee line are bracing for the worst this week as Kentucky raises its cigarette tax for the first time in 30 years, according to a report by the Associated Press.

Kentucky's tax rose on Wednesday from 3 cents per pack -- the nation's lowest cigarette tax -- to 30 cents per pack, a dime more than the tax in neighboring Tennessee.

"It's going to knock my socks off," said Frank Hinton, who employs 22 people at four Discount Tobacco City & Lottery outlets near the border.

While Kentucky's rate will still be low compared to many other states, experts say the increase is dramatic for a state with such a historic reliance on tobacco. Kentucky has the nation's highest adult smoking rate at nearly 31 percent, according to a report last year by the Centers for Disease Control and Prevention.

The state also is the nation's leading producer of burley, a type of tobacco used in cigarettes. Cash receipts from sales of Kentucky-grown tobacco peaked at about $900 million in 1998, but have fallen to roughly half that in recent years.

Gov. Ernie Fletcher has called Wednesday a "historic" day for Kentucky and one penny of the 27-cent increase will be set aside for cancer research.

But some Kentucky lawmakers who have advocated big tobacco taxes for years are fearful the state has aimed too low. Only five states will have lower cigarette tax rates—led by North Carolina at 5 cents per pack.

"I wish it would have been higher," said Rep. Jon Draud, R-Edgewood. "Your goal is not to raise a lot of revenue, it's to get people to stop smoking."

Kentucky retailers were expecting a rush in cigarette sales prior to Wednesday. Billy Grantz, president of Cox's Smoker Outlets and its 19 stores around the Louisville area, had already seen a bump in sales.

Still, he worries about what the tax will do to his business and his 120 employees.

"I know it's going to hit -- I just hope it's not too bad," Grantz said. "I've warned all of my employees, if this hurts too bad, we might have to make some cuts."
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