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Massive Cigar Tax Increase Proposed in Kansas

taxman

Kansas is proposing a massive tax increase in the bill called HB 2672 (link goes to raw PDF file).

This is becoming an extreme trend recently as Canada raised the cigar tax just last week. In that case there was zero warning, our Canadian friends woke up one morning to a huge tax increase on cigars. At least in Kansas there is a chance to fix this before it becomes a problem.

A tax is hereby imposed upon the privilege of selling or dealing in tobacco products in this state by any person engaged in business as a
distributor thereof, at the rate of 10% increased to 78% of the wholesale sales price of such tobacco products. Such tax shall be imposed at the time the distributor

10% jacked up to 78% . Though the tax is actually closer in line to what individuals pay in many other states the chances are very high that individuals will be greeted with sticker shock when they try to buy any tobacco product such as cigars. This most likely will lead to an increase in contraband sales and undesirable outcomes.

For example, The Colombia University news service ran an article surrounding the after effects of New York’s price increase a few days ago.

“This is not a tobacco issue, but a small business issue,” Schimel says. “I never joined the Assembly to put people out of business. New York State is losing. We’re putting Pennsylvania in business. As much as we believe in taxes, there’s a point of diminishing returns.”

The argument being that the tax increase destroyed revenue for New York since the result wasn’t increased tax revenue, but rather a flood of companies leaving the state. Pennsylvania does not tax tobacco products, as a result a massive influx of tobacco companies have moved into the state employing a large number of individuals. Which in turn increased the tax revenue for Pennsylvania through payroll taxes, property taxes, automobile taxes and those newly transplanted employees shopping and spending money locally in Pennsylvania.

The end result for Kansas most likely will mirror New York, where the neighboring states will reap the benefits of the tax increase.