Electronic cigarettes, which escaped taxation in the General Assembly last year and were then labeled an epidemic among teenagers, are in line to get taxed when the legislature convenes Jan. 7.
That was clear from statements by legislative leaders at the Kentucky Chamber of Commerce's legislative preview this month.
"There does appear to be some pretty solid support behind the vaping taxes," House Speaker David Osborne said, using the common term for use of electronic cigarettes. Many don't produce a vapor, which has liquid particles suspended in the air, but an aerosol, which has liquid and/or solid particles suspended in a gaseous medium.
Senate President Robert Stivers said the health effects of e-cigarettes make it easy "to have a two-fold conversation -- health and revenue -- so I think there's interest" in extending the state's tobacco excise tax to e-cigs. Afterward, he said, "I'm very much interested in it."
Chamber of Commerce President Ashli Watts said later that some legislative observers have said that revenue from taxing e-cigarettes "would be a pretty good start on school safety," a law the legislature passed last year but did not fund.
In an earlier session, Senate Majority Floor Leader Damon Thayer said, "On the vaping tax, I think that's something we probably need to consider. I don't favor it being as high as a cigarette tax, but I think there's probably a happy medium that we can find."
In the 2019 legislative session, Rep. Jerry T. Miller, R-Louisville, unsuccessfully sponsored an e-cig tax bill that would have dedicated the estimated revenue of $35 million a year to the state's unfunded pension liability. His latest version doesn't do that, on the advice of Osborne, who said the lack of earmarking would get the bill more support, Miller said in July.
In 2018, an e-cigarette tax was included in legislation that raised the tax on traditional cigarettes, but the e-cig tax was removed in the Senate, just before final passage and after lobbying by Altria Group, the largest tobacco company and 35% owner of Juul Labs, the largest e-cig company.
Sen. Chris McDaniel, chair of the Senate Appropriations and Revenue Committee, said in July that he wasn't sure what happened, but thought that a staff member may have raised "a definitional problem" that couldn't be resolved at the last minute.
Stivers has said he couldn't recall what happened, but in an interview after his appearance he said he did not recall Altria lobbying him on the e-cig tax. Altria's top lobbyist came to Frankfort in the final days of the 2018 session, but Stivers said the company may have done that in an effort to revive a bill that would have raised the legal age to but tobacco and e-cig products to 21 from 18.
Teenagers' use of e-cigarettes soared in 2019, increasing to more than 5 million in 2019 from 3.6 million in 2018, a 39% jump, according to the latest annual National Youth Tobacco Survey. The devices are increasingly being used with marijuana and other cannabis products, the National Institute on Drug Abuse reported Dec. 18.
Other legislative issues
Gov. Andy Beshear campaigned on the idea of legalizing and taxing medical marijuana, but McDaniel threw cold water on that idea. He said the legislature's decision on medical cannabis would be driven by policy, and if it is deemed to be "a pharmaceutical, we don't tax pharmaceuticals in this state, and we're not going to start." Prescription drugs are exempt from the sales tax.
More broadly, the 2020 legislative session will be like none other: a governor of one party dealing with a legislature controlled by the other party -- and more powerful than it was in 1967-71, when Republican Louie Nunn was governor and pushed a sales-tax increase and other programs through a relatively weak legislature controlled by Democrats.
Stivers told the crowd that Gov. Andy Beshear "surely realizes" that his election wasn't a mandate, since the average Republican vote margin was 213,000, except for "one anomaly race," Beshear's defeat of unpopular Republican incumbent Matt Bevin. Later, he said "The governor needs to be careful what he says and does" with helping Democrats seeking GOP-held legislative seats because trying to unseat Republicans and failing "would weaken him tremendously."
Osborne said Republicans "sometimes" worked well with Bevin but "had a really productive relationship" with the governor's father, Steve Beshear, who was chief executive in 2007-2015, before Republicans gained a majority in the House. "I think you will see people anxious to work cooperatively," Osborne said.
Osborne said he is "a little bit hesitant" about senators' idea to limit the governor's pardon power with a constitutional amendment in the wake of controversial pardons and commutations Bevin issued on his way out of office. Stivers said he agreed that the legislature needs to move carefully, but "The shock value of what happened has created quite a bipartisan atmosphere" about addressing the issue.
Stivers said the legislature needs to do more to help the economy in Kentucky's rural areas, many of which are falling farther behind the rest of the state and are "done regions" to the commonwealth. He said 87% of admissions at the University of Kentucky's main hospital come from outside Fayette County.
Kentucky hospitals have benefited greatly from the 2014 expansion of Medicaid, which was initially covered by the federal government under the 2010 Patient Protection and Affordable Care Act. In 2017-19, the state has paid 5, 6 and 8%, respectively; in 2020 it will begin paying the reform law's limit of 10%. "We know Medicaid costs are going to dramatically increase," Osborne said.
Information for this story was also gathered by Kentucky Health News reporter Melissa Patrick.
Kentucky Health News is an independent news service of the Institute for Rural Journalism and Community Issues, based in the School of Journalism and Media at the University of Kentucky, with support from the Foundation for a Healthy Kentucky.