Governor Proposes Tax Increases on Liquor and Tobacco
The new budget plan released today by Governor Sam Brownback proposes consumption tax increases for cigarettes, tobacco products and liquor enforcement. Liquor enforcement tax is the 8 percent tax that is paid on all purchases at the retail liquor store. The proposal increases that tax to 12 percent. According to the Governor’s Budget Report, the last increase in the liquor enforcement tax was 1983, when it was increased from 4 percent to 8 percent.
The last increase on cigarette taxes was in 2003 when it was increased to 79 cents per pack. The tobacco products tax has remained at 10 percent of wholesale price since 1972. The new rates would be $2.29 per pack and 25 percent of wholesale price.
Thursday evening, Governor Sam Brownback delivered his State of the State address, declaring that Kansas recent tax policies have been successful and that he would stay the course toward achieving zero income tax in Kansas. Briefly addressing the State’s revenue deficit (projected to exceed $700 million in FY 15 and FY 16), the Governor laid the blame directly on increased expenditures for education. He recommended rewriting the school funding formula entirely and assured legislators that his proposed two year budget would balance, with revenues exceeding expenditures.
Friday morning, the Governor’s Budget Director Shawn Sullivan and former legislator, now Department of Revenue representative Richard Carlson delivered the budget proposal to a joint meeting of the Senate Ways and Means and House Appropriations Committees. Some legislators are not sure that the proposed tax plan actually lines up with the promises of the Governor’s speech, because it would revise the statutory scheduled income tax reductions. (Calling off these further reductions was a primary recommendation of the Paul Davis campaign for Governor.)
The current tax statutes are scheduled to decrease income tax rates progressively, then establish a cap on revenue growth of 2%, so that any additional revenues must be committed to tax reduction. Under the Governor’s proposal, there would be only one more scheduled rate reduction, reducing the lower income tax rate from 2.7% to 2.66% (paid by those who earn less than $15,000 a year if single or $30,000 a year if married). The 4.6% rate paid by higher earners would not change. It would also implement immediately the reduced value of home mortgage interest and property tax deductions to individual income taxes. (This “haircut” was part of last year’s tax bill, but was not scheduled to begin.)
Revenue exceeding 102% of the prior year (2% growth) would go into a budget stabilization fund (replacing the need for 7.5% ending balance) and revenue above 103% would go into a tax reduction fund. This is similar to the current policy designed to limit growth of government expenditure to 2%, but provides a reserve budgetary fund before pursuing further tax reduction.
The session has only just begun, and legislators return next Tuesday after the Martin Luther King Jr. holiday to get started on real committee work. This week, most committees only held informational meetings or agency reports.