States Consider Raising Legal Age For Tobacco

At least 11 states have considered measures this session mimicking Hawaii’s newly implemented law that raises the minimum age for purchasing tobacco products to 21, according to LexisNexis State Net’s legislative database. California’s SB 7 b is the farthest along, awaiting gubernatorial action. But legal tobacco age measures have already failed in four of the other states.

 

Source: LexisNexis State Net

 

Legend:

 

Legal tobacco age legislation awaiting gubernatorial action: California

 

Legal tobacco age bills pending in legislature: Iowa, Illinois, Massachusetts, New Jersey, Rhode Island, Vermont

 

Legal tobacco age legislation failed: Connecticut, Utah, Washington, West Virginia

 

 

GOP Backlash Against KS Gov’s Proposed Budget Fixes

Last month Kansas Gov. Sam Brownback (R) proposed three options for closing his state’s projected $290 million budget hole: borrow against expected future proceeds from the Tobacco Master Settlement Agreement, delay making a $100 million payment into the state’s pension fund, or cut spending significantly for state agencies, universities and public schools.

 

But Brownback came under fire even from members of his own party for failing to include a fourth option: closing a loophole in a business tax exemption enacted in the state four years ago that allows some business owners to avoid paying any income tax on their profits. Brownback championed that exemption, saying it would spur economic growth, but the state had the seventh worst nonfarm job performance in the nation between March 2015 and 2016, according to the U.S. Bureau of Labor Statistics.

 

“Gov. Brownback is asking us to take our finger out of the dike and stick our heads in,” said Rep. Mark Hutton (R), following a House and Senate budget committee meeting.

 

Hutton said the governor was advocating for a long-term commitment to provide short-term budget relief, while closing the business tax loophole would provide a long-term fix.

 

“If we would fix that one problem, we wouldn’t need any of these options,” he said.

 

Sen. Jim Denning (R), who compared the business tax problem to a leaky faucet, said simply requiring businesses to have at least one employee to qualify for the tax exemption would generate about as much revenue as the governor’s tobacco settlement proposal.

 

“I think it’s about time we just fix the darned leaky faucet and get this thing behind us,” he said.

 

But Senate budget chairman Ty Masterson (R) said rolling back the tax exemption probably wouldn’t solve the state’s immediate budget problems because there would be a delay before it took effect.

 

House tax chairman Marvin Kleeb (R) said he doubted a bill to make such a change would even pass in his chamber, where Republicans hold a 97-28 majority.

 

“Last year we got 27 votes for a pass-through [business exemption] fix,” he said, adding, “So I think it’s very prudent to look at these other options.”

 

And Senate President Susan Wagle (R), who supported efforts to end the business tax exemption last session, said she opposed a tax change this year.

 

“The short-term fixes and one-time funding solutions the Governor has presented are not ideal; however, raising taxes is not the answer,” she said in an email. “Making ends meet will be a heavy lift for the legislature, but I am confident we can find a resolution quickly.” (WICHITA EAGLE, LEXISNEXIS STATE NET)

 

In CA Rich Getting Richer, Paying More Income Taxes

Nearly 90 percent of the income tax revenue California collected in 2013 came from the top one-fifth of earners, those making $91,000 or more. And 45 percent of the state’s income tax revenue came from the top 1 percent of earners, those with an adjusted gross income of $501,000 or more.

 

Part of the reason for the top-heaviness of California’s tax burden is that those in the state’s top income bracket are the only ones whose income has grown over the last two decades. The average gross income for the top 1 percent of filers nearly doubled over that period, from $858,723 in 1994 to $1.6 million in 2013. The AGI for the top fifth as a whole grew by about 38 percent, from $173,000 to $238,000. The AGI for the second-highest fifth, however, slipped by about 1 percent, from $67,507 to $66,746, while the AGI for second-lowest fifth dropped by 9 percent, from $22,391 to $20,411.

 

“The story has been very consistent since the mid-1980s – there are much bigger gains in earned income at the top,” said Ann Huff Stevens, a professor of economics, director of the Center for Poverty Research and the interim dean of the Graduate School of Management at the University of California, Davis. “Below that, it’s been stagnant. At the bottom, there’s been a decline.

 

Stevens attributes the divergence to California’s uneven recovery from the recession and the impact of rapid globalization and technological change on some incomes. The growing income inequality isn’t all bad news for the state, however. The spending plan issued by Gov. Jerry Brown (D) in January anticipated that income tax revenues for the current budget year would be “significantly higher” than projected back in June because “increases in wages are likely more concentrated among high-income taxpayers who pay higher marginal tax rates.” (SACRAMENTO BEE)

‘Sin Taxes’ Losing Luster?

Since 2000, 20 states have raised their cigarette taxes, with Louisiana becoming the latest to do so on April 1. And over a dozen states have expanded gambling since the Great Recession. But as states have become more reliant on so-called “sin taxes” to help fill their budget holes, revenues from those tax sources have been declining.

 

Increasing competition has cut into states’ share of the gambling pot. According to a study by the Rockefeller Institute, 18 states reported a decline in gambling revenue in the most recent fiscal year. Connecticut is forecasting that a new casino scheduled to open in 2018 in neighboring Springfield, Massachusetts will reduce its casino revenue by 26 percent in just the first fiscal year. The state has responded to that threat by allowing local Indian tribes to open a new casino near Springfield. Other states are eyeing new forms of gambling such as sports betting.

 

Meanwhile, declining smoking rates, spurred in part by higher cigarette taxes, have driven tobacco tax revenue down from $14.3 billion in 2011 to $16.9 billion in 2014, according to the Rockefeller Institute. Consequently, some states are turning to legalizing and taxing marijuana like Alaska, Colorado, Oregon and Washington have done or to taxing e-cigarettes and vaping. Others, like Oklahoma, are just raising their tobacco taxes even higher, which tobacco retailers say just creates a never-ending cycle.

 

“They keep coming back time and time again, year after year for additional revenue,” said Thomas Briant, executive director of the National Association of Tobacco Outlets.

 

But there’s a potential long-term economic benefit to tobacco taxes that could keep them a popular option in the states. A recent study by researchers at the University of Illinois at Chicago and Northeastern State University found that every percentage point of decline in the adult smoking rate in Oklahoma would reduce healthcare costs in the state by $320 million. (WALL STREET JOURNAL)

 

Budgets In Brief - May 2 2016

Internet Tax Bill Advances in OK

The OKLAHOMA Senate passed an amended version of HB 2531 last month that will require out-of-state companies to provide Oklahoma customers a statement at the end of the year indicating the amount of their purchases and that they may owe state tax on those purchases. The bill headed back to the House for concurrence. (OKLAHOMAN [OKLAHOMA CITY], LEXISNEXIS STATE NET)

 

LA’s Budget Gap Shrinking

LOUSIANA’s projected budget gap for the fiscal year that began on July 1 has shrunk from $750 million to $600 million due mainly to expected savings from Medicaid expansion, according to the administration of Gov. John Bel Edwards (D). (TIMES-PICAYUNE [NEW ORLEANS])

 

CA Dems Seek $1.3B for Affordable Housing

CALIFORNIA Assembly Democrats want Gov. Jerry Brown (D) to agree to a $1.3 billion boost in spending on affordable housing to help alleviate an affordable housing crunch in the state. The Democrats say the state’s sizeable budget surplus justifies the one-time expenditure. (SACRAMENTO BEE)

 

-- Compiled by KOREY CLARK