Kansas Governor Seeks Tax Increases to Address Budget Woes

Kansas would nearly triple its cigarette tax, raise taxes on alcohol and slow down promised income tax cuts to balance its budget under proposals Republican Gov. Sam Brownback outlined Friday.

Brownback presented detailed recommendations to the GOP-dominated Legislature for eliminating projected shortfalls totaling more than $710 million in the current budget and for the fiscal year beginning July 1. He also presented a spending blueprint for the fiscal year beginning in July 2016 designed to leave the state with some cash reserves.

The state's budget problems arose after lawmakers aggressively cut personal income taxes in 2012 and 2013 at Brownback's urging to stimulate the economy. Brownback's budget-balancing plans would make those reductions more gradual, without abandoning his long-term goal of eliminating income taxes. The aggressive cuts had cemented Brownback's reputation in conservative circles and he has promoted them as something other states could emulate.

He proposed increasing the cigarette tax to $2.29 a pack from 79 cents and raising the tax on other tobacco products to 25 percent from 10 percent. The tax paid by consumers on beer, wine and liquor at liquor stores would jump to 12 percent from 8 percent. The increases would raise $394 million over two years, starting in July.

Thomas Koehn, a 49-year-old unemployed Topeka resident, estimated that the cigarette tax increase would cost him $50 a month. Ruby Tate, a 47-year-old cashier at Discount Smokes and Convenience Store in central Topeka, said the proposals would hurt people on fixed incomes.

"Do you cut back the smoking or do you cut back the medicine?" she said. "A lot of people are going to make the choice of the medicine."

The governor's proposals also would divert funds for highway projects to general government programs and delay the elimination of a long-term funding gap in the pension system for teachers and government workers. Overall state aid for public schools would remain flat through June 2017 — with higher spending on teacher pensions.

Brownback is proposing more than $15 billion in total spending for the current fiscal year and each of the next two fiscal years. The state would end June 2017 with $253 million in cash reserves.

The Legislature's top Democrats said only that they're concerned about some of his proposals — without being specific — and would have more to say next week.

Brownback promised during his State of the State address Thursday night that Kansas would keep moving to eliminate its income taxes, despite its budget problems.

He and top aides defended his proposals to raise cigarette and alcohol taxes, saying it's better to tax consumption rather than "productivity."

"You can't get out of a tax on productivity, but you can on consumption," Revenue Secretary Nick Jordan said in an interview. "You can decide how you're going to spend your money and what you're going to spend it on."

The state has cut its top personal income tax rate 29 percent and exempted the owners of 191,000 businesses altogether. Those changes would remain in place.

However, future cuts would be slower. For example, the state's lowest income tax rate, now 2.7 percent, was set to drop to 2.4 percent for 2016 and would dip to 2.66 percent instead.

Also, deductions that were phased out as rates dropped would be eliminated more quickly, including a popular one for interest paid on home mortgages.

Jeff Glendening, state director of the anti-tax group Americans for Prosperity, said that under the governor's plans, movement toward eliminating income taxes "has slowed to a crawl."