The Illinois Supreme Court says “No” to the state’s proposed pension overhaul. The plan would have limited cost-of-living adjustments for public employees, raised the retirement age for some, and capped pensions for those with highest salaries. But the Illinois constitution says benefits for public pensioners “shall not be diminished or impaired.” This sends Illinois back to square one, with a budget crisis, an underfunded pension, and no plan. Colorado marijuana retailers: Time to pay the piper. Federal income taxes are an especially heavy burden for the state’s marijuana shops—one retailer owes $275,000. They can’t claim deductions for ordinary business expenses such as rent, employee salaries, or utility bills thanks to a 1982  federal tax law that was aimed at stopping illegal drug dealers from deducting smuggling costs. On the brighter side: Oregon Democrats Senator Ron Wyden and Representative Earl Blumenauer introduced legislation this month that would allow legalized marijuana businesses to deduct expenses on their federal returns. Kansas lawmakers consider a state sales tax hike. Thanks to steep income tax cuts under GOP Governor Sam Brownback, Kansas faces an $800 million budget shortfall next year. A proposed budget would still leave a gap of about $422 million. The House Taxation Committee held a hearing last week on a proposed sales tax hike that could shrink the deficit by $164 million. The bill would raise the rate from 6.15 percent to 6.5 percent. In Nevada, a move to raise the cigarette tax. The state’s Senate Revenue Committee passed a measure to raise cigarette taxes by $1 per pack. The measure would also make permanent  increases in payroll and sales taxes that were originally scheduled to expire in 2009. Enacted as temporary fixes for Nevada’s economic woes in the Great Recession, GOP Governor Brian Sandoval now wants to use those taxes to help fund his $7.4 billion budget. The Chinese government wants to discourage smoking, too. It plans to raise the wholesale cigarette tax from 5 percent to 11 percent. China is the world's biggest maker and consumer of tobacco. The World Health Organization favors the increase, but noted that the extra cost needs to be felt by consumers, or salient, in order to be effective. Interested in subscribing to the Daily Deduction, the Urban-Brookings Tax Policy Center summary of the day’s tax news? Sign-up here to get the Daily Deduction delivered to your inbox every morning. If you’d like to tell us about a new research paper or have any comments about our feature, write us at [email protected].