After facing stiff resistance to a proposed hike on alcohol and cigarette taxes, Kansas Gov. Sam Brownback (R) is now exploring cutting government spending and implementing other reforms to close a $600 million projected deficit for fiscal year 2015.
In January, Brownback proposed raising the cigarette tax by nearly 189 percent, from 79 cents per pack to $2.29 per pack, and raising the tax on beer, wine, and liquor by 4 percentage points, from 8 percent to 12 percent.
Official estimates had predicted the tax increases would add $212 million in revenue over the first two years.
Best-Laid Plans…
Utah State University economics professor William Shughart says sin taxes usually don’t work as planned.
“An increase in Kansas’s cigarette excise tax would strengthen incentives for smuggling and cross-border shopping,” said Shughart. “The bottom line is that the proposed tax increase will not generate $600 million in extra revenue, but something less than that number.”
Shughart says sin taxes, like those proposed by Brownback, are popular among politicians.
“People living in poor households do not vote as frequently as their high-income counterparts,” Shughart said. “So politicians can get away with imposing or raising such taxes without too much to fear on the next Election Day.”
Not a ‘Revenue Problem’
Dave Trabert, president of the Kansas Public Policy Institute, says Brownback’s sin-tax proposal addresses revenue when it should deal with excessive spending.
“There is no need to raise any taxes,” Trabert said. “Kansas does not have a revenue problem; it has a very large spending problem. Tax revenue for fiscal year 2014 was 28 percent higher than in 2004, though inflation was only 24 percent higher.”
Trabert says although the state’s tax revenue has increased over the past decade, state government spending has increased faster.
“Revenue is running ahead of inflation and is predicted to do so into the future,” Trabert said. “Spending … this year is budgeted to be $1 billion more than 2004 spending, adjusted for inflation.”
Rudy Takala ([email protected]) writes from Washington, DC.
