Tuesday evening, Governor Brownback presented the State of the State address, and promised that his proposed budget would be balanced, including a combination of revenues and spending cuts.  The Governor’s proposal to raise revenues includes doubling the liquor enforcement tax rate from 8% to 16%.  This is the tax paid at the liquor store register.

The revenue proposal recommends adding another $1.00 tax per pack of cigarettes and increases the tobacco products tax from 10% to 20%.

The revenue proposal would also increase the annual business filing fee for for-profit entities from $40 to $200.  That annual fee is paid to the Secretary of State’s office.  Most liquor stores pay this fee for their LLC filing.

Additionally, the Governor’s plan will freeze the bottom category income tax rate at 2.7%.  The rate is supposed to step down to 2.6% this year.  The tax changes will also impose income tax on passive income such as rents and royalties.

The entire package raises $179 million for fiscal year 2018.  That is far short of the projected deficit, and the budget plan includes multiple proposals for shifting funds, borrowing from State investments and selling other assets.  It also combines a couple of agencies and regulatory boards.

Meanwhile the House Taxation committee has already introduced several income tax bills designed to roll back the LLC income tax exemption and otherwise rewrite our income tax statutes. The Governor says the LLC Exemption is growing Kansas small business and should be preserved.

Some rumors suggest there is another revenue plan circulating behind the scenes that the Governor might prefer or at least wouldn’t mind signing if the Legislature passes it.  We have also heard that a Senate GOP plan will be announced soon.