Archive for Thursday, November 1, 1990


November 1, 1990


Local and state effects of a five-year, $490 billion deficit reduction package passed by Congress over the weekend will be difficult to predict, officials said.

"It's real hard to predict what the effects on the city could be," Lawrence City Manager Mike Wildgen said this week. "It's awfully early to see the trends."

Wildgen said sales taxes contained in the deficit reduction package mainly would hit local residents' pocketbooks but that the city would not be adversely effected by new taxes and spending cuts contained in the package.

"Judging by what I've been able to see so far, I don't think we will be directly affected," he said.

"We (the city) have to pay taxes on some of the things, such as the gasoline, but other than that, it shouldn't affect us too much."

WILDGEN said the city could lose revenue indirectly if local purchasing takes slacks off in coming months.

"We might feel it if this thing has an effect on people's buying habits," he said.

"If sales start to go down it could mean lost revenue for the city because of our sales tax, and that's the thing that we're concerned about."

"But other than something indirect like that, I don't see any measurable effect at all," Wildgen said.

Adminstration and congressional budget negotiators wrangled over taxes and spending cuts for more than four months before finalizing the deficit reduction package, which was passed by the House and Senate on Saturday.

The package, which congressional leaders said was a compromise between Democrats and Republicans, contains tax increases for tobacco and alcohol products, gasoline and luxury items such as furs and cars.

THE PACKAGE also contains curbs in defense and domestic program spending, an increase in Medicare premiums and taxes, and a higher Medicare deductible. Many of the new taxes and spending cuts will not go into effect until January.

The package was completed after Congress and President Bush enacted two temporary spending measures to keep the federal government from running out of money.

Before approving the measure on Saturday, legislators complained that they did not have enough time to evaluate the 1,600-page package, which weighed 24 pounds.

Members of the House did not even have copies of the agreement during Saturday's debate.

Local and state officials also said they were unsure about specifics of the plan.

"We're waiting for our national group to give us their evaluation of this thing," said Don Wilson, president of the Kansas Hospital Assn. in Topeka.

WILSON SAID all of Kansas' 140 hospitals will suffer some setbacks because of the cost-cutting package, but he did not know how serious the effects would be.

"There's going to be very little new money for hospitals. And it's going to have an effect on (Medicare) reimbursement for hospitals," he said. "Everybody who's on Medicare will be affected.

"Obviously, those who are on fixed incomes will be hit the hardest by this," he said.

David Longhurst, manager of the Riverfront Plaza at Sixth and New Hampshire, said merchants may have to wait six months to a year before seeing any effects of the measure.

"The psychological effects might be seen right away, and you might see that in Christmas sales," he said.

"But a lot of these things don't go into effect until next year, so you may not see any change until then."

LONGHURST also said the so-called "sin taxes" on alcohol and tobacco products could shift people's buying habits to other items.

Ben Zavala, general manager of Sonny Hill Motors Inc., 3400 Iowa, said most local automobile buyers would not be affected by the deficit reduction package. Under the plan, a 10 percent tax will be levied on buyers of cars priced at or above $30,000.

"Two to four thousand dollars is not going to matter to that kind of buyer," he said of those who would be paying the tax.

"Locally and nationally, in terms of the number of cars (sold) in that (price) range, you're talking small potatoes," he said.

However, Paul Shackelford, co-owner of the city's taxicab service, A-1 City Cab, said a 5-cents-per-gallon gasoline tax contained in the deficit reduction measure could sharply affect his service if current gasoline prices don't come down.

"It's going to drastically affect us," he said.

SHACKELFORD said A-1 spent about $36,000 on gasoline for its vehicles last year.

"This year it's going to be much more because the gasoline prices are already high," he said. "But hopefully the prices will come down a few cents and it will offset the new tax."

A-1 this month increased its taxi rates from $4 to $4.25 because of increased fuel costs. Shackelford said he was not sure if the new tax would force him to raise rates again.

John Webb, owner of Webb's Liquor, 800 W. 23rd, said federal increases in alcohol taxes would hurt sales initially.

"I think people would start to change their buying habits," he said.

The federal measure calls for doubling the beer tax to 32 cents a six-pack, raising the $12.50-a-gallon tax on 100-proof liquor by $1, and other taxes on wines.

WEBB SAID the federal tax on beer hadn't been raised since 1950.

"When you're talking about a certain tax on the federal level, the actual price is going to go up a lot more, and that's what people don't realize," he said.

Webb said an additional 16-cent tax for a six-pack of beer would raise the retail price of beer 25 to 30 cents per six-pack.

"We had a federal excise tax increase not too long ago on distilled spirits," he said. "There was a noticeable shift to beer after that."

Webb said increased beer prices may shift buyers' alcoholic beverage preferences again, or could simply result in less consumption.

"When the government needs money, these are the taxes that they always go after first because the politicians can take the least political heat for raising them," Webb said.

Commenting has been disabled for this item.