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In Kentucky, stores brace for cigarette tax increase

Tobacco-reliant state takes plunge

FRANKFORT, Ky. -- Discount tobacco stores near the Tennessee line are bracing for sales to drop this week as Kentucky raises its cigarette tax for the first time in 30 years.

From a national low of 3 cents per pack, Kentucky's tax will rise tomorrow to 30 cents per pack -- topping the 20-cent 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 with many other states, analysts 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 is also 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.

Governor Ernie Fletcher has called tomorrow a historic day for Kentucky. One penny of the 27-cent increase will be set aside for cancer research.

David Tandy of the American Cancer Society called the increase ''a monumental leap for a state like Kentucky."

But some Kentucky lawmakers who have advocated big tobacco taxes for years are fearful that 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 Representative Jon Draud, a Republican. ''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 tomorrow. Billy Grantz, president of Cox's Smoker Outlets and its 19 stores around the Louisville area, has 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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