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Kansas Sales Tax, Cigarette Tax Going Up

Kansas Sen. Jeff Longbine (R) accused Gov. Sam Brownback (R) of using “political blackmail” to get a budget package that included higher state sales and cigarette taxes approved two weeks before the end of the state’s fiscal year.

“This fix doesn’t fix the problem,” Longbine told the Kansas City Star. “If you’ve got congestive heart failure, you go to the cardiologist and not the dentist.”

Democrats accused Brownback of erasing a $400 million budget deficit on the backs of the poor.

Senate Minority Leader Anthony Hensley (D) said, “We’re asking poor people to pay more to keep a misguided, reckless tax policy in place.”

Bernie Koch of the Kansas Economic Progress Council warned the plan would hurt the very people Brownback came into office saying he wanted to help the most – business owners.

For his part, Brownback (R) congratulated the legislature for approving the sales tax increase that completed “a pro-growth tax policy and a balanced budget.”

And with that Brownback put the gun he had held to the head of the legislature back into his holster.

While the legislature debated his tax proposal and his fellow GOPers offered their own ideas, Brownback threatened massive budget cuts and laid out the possibility that state workers, who were declared “essential” and could not be fired, might have to work without the promise of getting paid.

Massive budget cuts were only days away if the legislature had not agreed on a spending plan, which according to Kansas’ constitution had to be balanced.

This should have been easy. Everyone knew Kansas faced a $400 million budget deficit. Republicans controlled both houses of the Kansas Legislature. Brownback is a Republican. But still debate went into the 11th hour.

In the end, Kansas House members held their noses, gritted their teeth and approved Brownback’s budget plan at 4 a.m., June 12. Twelve hours after that, the Senate approved the plan, finishing a 113-day legislative session, which was the longest in the state’s history.

Opponents to the plan pushed by the Brownback administration blamed the $400 million budget hole on the governor’s insistence on cutting taxes to the bone in 2012.

That tax package erased the state’s top tax bracket and cut all income tax rates. But what Brownback’s opponents really had a problem with was the provision that removed more than 330,000 business owners from the state’s tax rolls.

Sen. Longbine was one of the Republicans who wanted to roll back that tax exemption for business owners in the 2015-2016 budget. But Brownback threatened to veto any legislation that contained that provision.

Brownback, instead, pushed a plan that included raising the state sales tax from 6.15 percent to 6.5 percent in July, along with raising the Kansas cigarette tax by 50 cents.

He warned failure to approve the package would mean either the budget for Kansas schools would be cut by $200 million or an across-the-board 6.2 percent cut for the state’s regents universities.

The Brownback administration projects the two-bill package approved by the legislature will bring in $384 million. It does not take a mathematician to realize that falls short of filling the $400 million budget hole.

Republicans in the Kansas Legislature told the Associated Press Brownback would still have to cut $50 million from the budget during the fiscal year that begins July 1.

The two bills, one covering the cigarette tax hike while the other addresses the sales tax increase, also include a small increase in taxes for business owners and farmers.

Sen. Hensley said the budget package put the state officials in the position of “playing Robin Hood in reverse” because Kansas residents at or below the poverty line would pay a higher portion of their income in sales tax than would richer Kansans.

While Democrats worried about the poor, the Kansas Economic Progress Council’s Bernie Koch said business owners would actually suffer the most.

“It’s not the sales tax you pay on a cup of coffee; it’s the sales tax the business pays when it buys the coffee cup and the coffee,” he said.

A Kansas Center for Economic Growth study showed the state was at a disadvantage compared to its neighbors in what businesses had to pay in sales taxes before the legislature approved raising the tax to 6.5 percent.

The study showed that of all taxes paid by a Kansas business, 28 percent go to sales taxes while the average business in the six-state region paid just below 26 percent for Fiscal Year 2013. That is higher than the nationwide average of 21 percent.

“It’s hard to image that what we have right now could get worse,” Annie McKay, the executive director of the Kansas Center for Economic Growth, told the Washington Post, “but this actually makes it worse.”

Despite the need to fill this $400 million budget deficit, Brownback said he remained confident Kansas was on the right path to economic prosperity.

He pointed out his “Roadmap for Kansas” cited two objectives or metrics by which the success or failure of the plan could be judged: increasing per-capita personal income and growing private sector employment.

“Our tax policy is working,” Brownback said. “The proof of that can be seen in the number of working Kansans, our low unemployment rate and the fact that working Kansans have more money in their pockets to save or spend as they see fit.”