State Journal article on tax reform. Budget shortfall may be final straw for changes By Kevin Wheatley, Published: July 26, 2014 7:42PM Every time the budgetary ax falls in Kentucky, the cries for tax reform grow a little louder. The topic has been discussed for many years, with a blue ribbon commission led by Lt. Gov. Jerry Abramson proposing 54 changes in 2012 that became the basis for Gov. Steve Beshear’s tax reform plan in this year’s legislative session. Beshear’s idea hinged largely on cutting individual and corporate income tax rates while charging Kentucky’s 6 percent sales tax on some services, with an estimated $617 million in this biennium and $209 million per year beyond in tax revenue gains. But Beshear’s tax proposal was never drafted into a bill, although Abramson testified before the House Appropriations and Revenue Committee about details of the plan. Beshear’s decision earlier this month to fill a $90.9 million gap in the 2014 fiscal year’s budget with a combination of fund transfers, excess appropriations and budget reserves has raised the issue to the forefront of next year’s legislative session, tax reform advocates say. Some point to businesses’ decisions to leave the state as further cause for concern, while others say spending pressures on education, pensions and other government services should prod lawmakers to consider overhauling the state’s tax system. Refining and perfecting Such a comprehensive and contentious change, however, will likely take a number of sessions to refine and perfect, advocates say. “It’s a tough issue obviously, but it’s an essential issue, and I think the pressure is growing,” said Jason Bailey, director of the Kentucky Center for Economic Policy, noting Beshear has “budgeted in a way to minimize the pain in the short term” while concentrating on areas such as education and childcare funding. Bailey also served on Beshear’s tax reform commission “… But some of the costs have been passed off to future years, so my hope is that the General Assembly will come around to the need to address this issue.” Tax reform itself is subject to several interpretations. While groups like Bailey’s generally support a graduated income tax scale with top earners taxed at higher rates than low-income workers along with a broader sales tax base, others, such as the Kentucky Chamber of Commerce, generally want a greater emphasis on taxing consumption rather than income to entice businesses here. Julia Crigler, director of the Kentucky branch of Americans for Prosperity, said her group is looking to partner with organizations like the state chamber on tax reform and plans to aggressively push the topic during next year’s legislative session and beyond. “It’s not anything that’s going to happen overnight,” she said. “… It’s got to come to some consensus and figuring out what components of tax reform are really going to put Kentucky on the right track to economic prosperity, so it might be one session, it might be two sessions, it might be three sessions, but it’s something we have to deal with.” Bryan Sunderland, spokesman for the chamber, also sees politics — and the next series of elections — playing a role in when lawmakers will broach the topic. “From our perspective, we’re going to continue to encourage both lawmakers and the executive branch that there are things that we need to change, and we’re going to commit to being a constructive part of that debate,” Sunderland said. Candidates’ thoughts Gubernatorial candidates, announced and considering, are looking ahead at the issue. Attorney General Jack Conway, the only Democrat who has filed for the office thus far, said he expects the next governor will deal with tax reform. The current tax structure, he said, fails to grow with the economy. “When the economy grows 1 percent, we don’t see a 1 percent growth in revenue,” Conway told The State Journal Thursday before the Wendell Ford Dinner. “It’s outmoded, so without increasing taxes is there a way to change our tax structure so that it’s more responsive to growth in the economy, and that, for me, is the larger question.” On the Republican side of the 2015 ballot, Louisville real estate Hal Heiner and Agriculture Commissioner James Comer agreed that tax reform will be a significant topic for the next governor during a forum at the chamber’s annual business summit Tuesday. Heiner, the only major Republican who has filed, said Kentucky is “desperate” for comprehensive tax reform, and both he and Comer advocated for a more consumption-based structure with significantly reduced income taxes. “What we do in the end has to be something that makes Kentucky the most competitive state in the United States on business,” said Comer, who plans to announce whether he’ll run in the GOP primary Saturday at Fancy Farm. While others may be looking ahead, Beshear still hopes to pass comprehensive tax reform in his final session next year. Talks are ongoing with members of the House and Senate, he said, but politics may stymie chances of broaching the topic in the waning months of his administration. “I can’t really gauge yet what the chances are for this next session,” Beshear said at the Wendell Ford Dinner. “Politics obviously complicates it with not only the legislative races this November, but then all of the statewide races next year. It’s a little harder to get people’s attention than it was before, but we’re still working on it.”
Posted on: Sun, 27 Jul 2014 14:32:25 +0000
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