State Tax Update Archive
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Volume 8, Issue 2

Kansas Legislator Designs Alternative Tax Increase Plan
Sen. David Corbin (R-Towanda) announced on 1/23/02 plans to increase the per-pack cigarette tax by 35 cents and the tobacco product tax by 10%, as well as increase taxes on all alcohol beverages, as an alternative to Gov. Graves's proposal that would increase taxes on a greater variety of products, including cigarette and motor fuel taxes, and vehicle registration fees. Senate President Dave Kerr (R-Hutchinson) supports a plan to solve the state's $426 million budget gap by cutting spending and without raising taxes.

Missouri Governor Announces Gaming Tax Plan
Governor Bob Holden (D) proposed repealing the state's gambling loss limit that prevents the purchase of more than $500 worth of chips or slot-machine tokens during 2-hour riverboat casino sessions. The repeal would cost taxpayers an additional $75 million in taxes annually; Gov. Holden also proposed increasing the gaming tax rate by $1, a 31.2% increase, making Missouri the state with the highest gaming tax in the country. Missouri already levies a 20% tax on casino gross receipts and a $2 per-person entrance fee (St. Louis Post-Dispatch, 1/24/02).

Ohio Internet Sales Tax Bill on Governor's Desk
Senate Bill 143 passed both houses of the state Legislature this week and now awaits the signature of Governor Bob Taft (R). The bill would force Ohio to join the Simplified Sales Tax Project, an inter-state tax collection system designed by the left-leaning National Conference of State Legislatures to combat free-market tax competition. Senator Robert Spada (S-24), a pledge-signer, co-sponsored the bill in the Senate. Although S.B. 143 does not specify an explicit tax increase, the bill allows designees to the inter-state commission to claim travel expenses which constitute a draw on state revenue and therefore a violation of the spirit of the Pledge (Columbus Dispatch, 1/30/02).

Pennsylvania Governor: Tap the Rainy Day Fund
Governor Mark Schweiker (R) has proposed spending $550 million in Tax Stabilization Reserve Funds to cover an estimated state budget shortfall of $620 million. Former Governor Tom Ridge (R) and acting Governor Schweiker have cut $309 million in spending so far from this year's budget. The "rainy day" Fund increased to $1.1 billion over the last few years because of a 1985 law mandating that appropriators designate at least 15% of every year's budget for the Fund. A two-thirds supermajority vote by each house in the Legislature must approve any proposal (like Governor Schweiker's) to spend rainy day funds. In other news, Gov. Schweiker is expected to announce expanded eligibility for Pennsylvania's Tax Back program next week when he presents his version of next year's budget. The Tax Back program eligibility change that Schweiker supports would raise the amount that a family of four can earn to qualify for state income tax exemption from $30,000 per year to $31,000 (Post-Gazette, 1/31/02).

South Carolina Pledge-Signer Announces Tax Increase
State Senator Mike Fair, a Republican from Greenville, proposed increasing taxes on beer and wine even though he has signed the Taxpayer Protection Pledge sponsored by Americans for Tax Reform. The pledge commits a legislator to "oppose and vote against any and all efforts to increase taxes." Senator Fair's proposal would increase taxes on beer from 0.6 cents per ounce to 1.2 cents, increase taxes on wine from 6 cents to 12 cents per eight ounces, and increase taxes on wine sold in metric quantities from 25.35 cents to 50.7 cents per liter (The State.com, 1/30/02).

Tennessee Legislators Consider Product Tax Increases
Taxpayers in Tennessee enjoyed stable tax rates on cigarettes, distilled spirits, and wine for the last 30 years, saving an average $300 million per year compared to residents of nearby states, according to the state legislature's budget office. Recent debate among members of the legislature emphasized the regressive nature of taxes on specified products, the importance of sales tax competition with neighboring states, and the impact increasing these taxes would have on small businesses. Some legislators and state-based industry officials argue that raising taxes on cigarettes, distilled spirits, and wine will decrease demand but consequently depress revenue collection. In Michigan, for example, increasing the per-pack cigarette sales tax from 25 cents to 75 cents caused sales to plunge 38% within just four years. The tax increase threatened the liberty of adult taxpayers to make legal choices, and the ability of small businesses to earn profits. Michigan also developed a severe smuggling problem when in-state smokers began "importing" their cigarettes from neighbor states that levy a less burdensome tax on the product (Tennessean, 1/31/02).