The upcoming local election may have an impact on your pocketbook.
Local elections – city councils and school boards – put people in place who make lots of decisions that impact your pocketbook on a daily basis.
From the price of speeding tickets, to property taxes, the price of bus fare to the price of taxes you pay when you eat out at restaurants, local officials help set those rates.
This election, local elected officials across the state are salivating – yes drooling at the possibility of collecting an additional 3% tax revenue off the sale of recreational marijuana.
This is big revenue for local coffers and big money out of your pocket, if you’re a recreational marijuana consumer.
Wait, that’s just one of several new and increased taxes on the ballot in Kansas City, MO.
Recreational Marijuana Taxes
Yes, there’s sales tax on marijuana and there’ll be a lot more taxes on recreational marijuana sales if several local ballot issues pass.
The state taxes medical marijuana at 4%, but according to the ballot initiative passed in November, recreational marijuana is taxed at 6%.
But further down in the November ballot initiative was an authorization for local and county governments to collect an additional 3% tax on recreational marijuana. However, before they can add the additional tax, local governments must get the approval of their citizens.
It’s not surprising, local officials all raced through the process to get the tax question on the April 4 ballot when very few people typically show up.
In Kansas City, voter turnout can be as low as 7% in a local April election versus 60% turnout for a November presidential election.
The City of Kansas City as well as Independence, Blue Springs and Grandview have a 3% tax on recreational marijuana sales within their city limits on the April ballot. In addition, Jackson County has a 3% tax on recreational marijuana sold anywhere in the county on the ballot.
So, if you do the math, if all of the taxes pass, recreational marijuana users will pay 6% state tax. Plus a 3% city tax and a 3% county tax for a total of 12% marijuana tax.
Compare that to a 3%% tax on marijuana and you have a pretty strong motivator for getting a medical marijuana card.
However, while we’re at it, we’d be remiss not to mention the standard local sales taxes that you’ll pay in addition to the marijuana tax: 4.23% state tax, 1.25% Jackson County tax, 3.25% Kansas City tax and 2.33% special district tax. So if the local and county taxes pass, the tax on recreational marijuana sales will be just over 20%.
Kansas City elected officials have agreed to use the 3% tax to address neighborhood quality of life improvements, to fund through the Dept. of Health, refuse and neighborhood cleanup services, homeless prevention services, and violence prevention services administered by the city. The city estimates that the tax will generate $3 million annually for the first few years and $10 million per year after the fifth year.
Jackson County plans to use its 3% tax to “fund community services and veterans support services through a dedicated special revenue fund.” County officials could not be reached for further details at the time of publication.
The 6% tax on recreational marijuana collected by the state was authorized for use to fund regulation and enforcement of recreational marijuana as well as a program to expunge records of people with marijuana-related offenses.
Advocates argue that if the measures pass, the higher tax rate is still lower than comparable marijuana taxes found in California, Colorado, and Illinois. A common tax rate on recreational marijuana across the country is 10% with a much lower rate on medical marijuana. Not surprisingly California has the highest rate in the country at between 23% to 38% for marijuana taxes alone.
Illinois, where the rate varies depending on the amount of THC, the tax rate can be as high as 20%. However, the overwhelming majority of states don’t have a special tax on marijuana, neither recreational or medical, instead marijuana is taxed the same as any other retail product sold in the state.
The April 4 local elections feature school board and city council races that have an outsized impact on the daily life of residents as well as proposals for new taxes on recreational marijuana and short-term rentals like Airbnb.
Short-term Rentals Taxes in Kansas City
One of the ballot measures on the Kansas City ballot targets short term rentals like Air BNBs, VRBOs and Booking.com locations.
This type of vacation rental has grown in popularity and Kansas City is finally trying to catch up and tax these rental properties in the same manner they tax hotels and motels.
A big source of income for Kansas City – and many other cities – is what’s often called a bed tax, or transient occupancy taxes (TOT). KCMO is calling the tax a transient boarding and accommodation tax.
These taxes were originally based on the concept that local governments needed a way to generate revenue for the costs of providing services – roads, public safety, and parks – to tourists. However, over the years, TOTs have become a stable source of general fund monies for cities.
When TOTs were originally established, there wasn’t a short term rental other than hotels. So, Air BNBs, et al have been able to get around paying the occupancy fees being paid by hotels. This ballot issue extends the current conventions & tourism tax to include short-term rentals at 7.5%, the same price paid by hotels and motels.
Hotel License fees
With this ballot issue, citizens will be authorizing the city to increase a hotel “license/establishment fee” that is currently $1.50 per occupied room per night, by up to another $1.50 per night or a maximum of $3 per night. This issue also expands the tax to include short-term rentals. Funds raised under this fee are identified as being designated to help fund convention and tourism activities.
“All accommodations will be charged a specific fee so that we’re consistent across the board,” says 1st District Councilwoman Heather Hall.
The mayor’s office estimates that the occupancy fee could generate $4.5 million annually, while the tax on short-term rentals could generate an estimated $2-3 million per year. City officials say imposing these taxes and fees on Airbnb and other short-term rentals levels the playing field with hotels and motels. A city auditor’s report says that Kansas City has already missed out on $3.7 million in taxes from short-term rentals due to not having a tax like the proposed ballot initiative.