Topeka Smokers got a break on Monday from a Senate committee that snuffed out a proposed cigarette and tobacco product tax increase from its $350 million package to balance the budget.
The Ways and Means Committee recommended a temporary 1-cent increase in the state sales tax and decoupling a state business tax break from federal law.
But from a plan it approved Friday, the committee removed a proposal to increase cigarette taxes by 55 cents per pack, and tobacco products from 10 percent to 40 percent of wholesale.
Ways and Means Chairman Jay Emler, R-Lindsborg, said he hoped removing the cigarette and tobacco tax increase would help the total package gain more votes when it hits the Senate floor on Wednesday.
Several key legislators opposed increasing the cigarette tax from 79 cents per pack to $1.34 per pack, saying it would hurt Kansas businesses because Kansas smokers living near Missouri would buy their cigarettes there because of that state’s low tax rate.
A tax increase that relied mostly on a sales tax component was more acceptable, Emler said. “I’m not saying they like it,” Emler said, adding, “They’re more willing to accept it.”
Under the committee’s new proposal, the state sales tax will increase from 5.3 cents per dollar to 6.3 cents per dollar on July 1, and then decrease to 5.7 cents per dollar on July 1, 2013. At that point, revenue from four-tenths of a cent of the sales tax rate would go toward the state highway plan.
Legislators have been looking for the right moves to balance the budget amid one of the worst revenue drops in Kansas history.
Nearly $1 billion has been cut from what was once a $6.4 billion budget as tax dollars dried up. Still, the state budget faces a nearly $500 million revenue shortfall for the coming fiscal year.
A combination of the proposed tax increase, the hope of additional federal health care funds from Medicaid, and other budget maneuvers would bridge that gap, legislators said Monday.
But some senators were already looking to decrease the proposed tax increase further.
State Sen. Jean Schodorf, R-Wichita, said she would propose an amendment to remove the disallowance of a state portion of a domestic production tax break for business that is worth $17 million per year. “This is a decoupling (from the federal tax break) that will hurt business,” Schodorf said.