Today’s meeting of the Kansas Senate Assessment and Taxation Committee heard testimony on SB 569, which would increase taxes on beer, wine, and liquor. The tone of the meeting was set in chairman Les Donovan‘s opening remarks, when he said “If you drink, you’re going to have to pay.”
The fiscal note for this bill is not available at the legislature’s website, but Donovan said that he intends to moderate the tax so that it raises $30 million in revenue per year, down from the $80 million he said the bill would raise if left in its present form.
Advocates for the disabled presented both oral and written testimony in favor of the tax increase. Curiously, the school spending lobby, in the form of the Kansas Association of School Boards and the teachers union, did not speak.
There were a number of opponents. Testifying on behalf of the Distilled Spirits Council of the United States, Whitney Damron supplied these facts: 1) Of the purchase price of the typical bottle of spirits purchased in Kansas, 47% is a tax of some type. 2) The higher taxes in this bill are projected to reduce retail sales by $55 million, which would result in 800 jobs being lost. 3) Kansas taxes are higher than those in Missouri and Oklahoma, which lead to lost sales to those states. This bill would make this situation worse.
Ron Hein, testifying for the Kansas Restaurant and Hospitality Association, said that the businesses he represents are facing large increases in unemployment insurance taxes, and that the smoking ban will hurt, too.
In written testimony, Tom Palace of the Petroleum Marketers and Convenience Store Association of Kansas noted that the stores he represents are facing possible increases in cigarette and tobacco taxes, sales tax, gasoline tax, soda pop tax, and now beer tax.
The bill contains a provision that on July 1, a tax must be paid on the inventory of a distributor or retailer. In written testimony, a liquor store owner from Wichita said that his store would have to pay $5,000 in tax on that day.
Perhaps the most compelling testimony was offered by Marshall Rimann, who with his wife owns two liquor stores, one in Lenexa, the other in Prairie Village, which is right on the Kansas-Missouri border. He said that Kansas City, Missouri has much lower taxes on alcohol than Kansas.
As an example, he said that a 30-pack of Bud Light currently costs, with all taxes, $21.05 in his store. After the proposed tax increases, the price would be $23.49. Advertisements in the newspaper indicate that the same product can be purchased in Missouri for $19.33, including all taxes.
A bottle of wine that sells for $8 would have a price differential of almost $2, he said.
Surprisingly, some items can be purchased cheaper at retail in Missouri than they can be purchased from a Kansas wholesaler. A bottle of Seagrams 7 Crown that retails for $15.99 in Missouri costs $18.99 from a Kansas wholesaler, for example.
He said that the July 1 inventory tax for his store would be over $10,000.
Both Rimann and a liquor store owner from Eudora said that their customers tell them they often shop in Missouri because of the lower prices resulting from Missouri’s lower taxes.
In questioning, Kansas Senator Chris Steineger, a Democrat from Kansas City, said that in the business world, it’s not possible to raise prices in tough times. Instead, restructuring is required. He said he’s disappointed that the legislature is not restructuring government. “We didn’t consolidate any agencies, we didn’t close any programs — all we’re doing is just making people pay more.” There are other options, he said, and that is to restructure how the states does business.
Steineger also mentioned the two Quik-Trip convenience stores that moved from Kansas City, Kansas to Missouri because of taxes. One store moved just 100 feet, keeping the same driveway. You enter the store through a driveway located in Kansas, but by the time you walk in the store, you’re in Missouri. Kansas taxes are the reason for this.
In closing remarks, Donovan said that legislators “absolutely hate” to raise taxes, but that raising revenue is required at this time. He said the committee will take final action on this bill on Thursday.