Restaurants fear higher alcohol taxes will drive customers away

Kansas restaurant owners and tobacco sellers warned Tuesday that Gov. Sam Brownback’s proposed tax hikes on alcohol and cigarettes would drive business out of Kansas into neighboring states.

Brownback wants to double the state’s liquor enforcement tax to 16 percent and increase taxes on each pack of cigarettes by a dollar, bringing the total state tax to $2.29 a pack. The governor also wants to raise the tax on other tobacco products from 10 percent to 20 percent.

These changes, which were weighed by the House Taxation Committee on Tuesday, would bring in an additional $209.5 million to the cash-strapped state over a two-year period. The state faces a more than $900 million budget hole through June of 2018.

“If we didn’t need the revenue, we wouldn’t raise any of it,” said Shawn Sullivan, the governor’s budget director. “But we need the revenue to help balance the budget, and the governor prefers consumption taxes over income taxes.”

Supporters of the tobacco tax hikes, such as the University of Kansas Cancer Center and the American Cancer Society, told the committee that raising the tax rate on tobacco products would have a positive health impact for the state by deterring people from smoking.

“Basically, what you want to see is enough of a sticker shock to get people to consider quitting,” said Roy Jensen, director of the KU Cancer Center.

Opponents of the bill, however, argued that Kansans wouldn’t quit smoking, they’d just quit buying their tobacco in Kansas.

John Federico, a lobbyist for the General Cigar Company, said raising the taxes on tobacco products would drive business into Missouri, which has the nation’s lowest tobacco tax at 17 cents a pack.

Restaurateurs made a similar argument about the governor’s proposed increase of the state’s liquor tax.

“Cross-border competition is a real thing in Johnson County,” said Janez Lomshek, a partner in the Talk of the Town Grill & Bar, which has locations in Leawood and Overland Park.

This story was originally published January 31, 2017 at 6:17 PM with the headline "Restaurants fear higher alcohol taxes will drive customers away."