Kentucky: June 2009 Archives
Lawmakers in Kentucky met this week in a special legislative session that started Monday. During Governor Beshear's opening address,
he proposed solving the state's nearly $1 billion shortfall for the new
fiscal year (which starts in less than two weeks) through spending
cuts, federal stimulus dollars, and gambling. He
called
on lawmakers to approve a proposal that would expand gambling at horse
tracks to include casino-style gambling. He argued, "If we don't act
now, our racetracks face declining status and even the certainty of
closure."
The latter proposal isn't without it critics (after all, gambling is a notoriously regressive way to raise revenue). But proponents of the legislation are highly-organized. Wednesday hundreds of proponents of the legislation (including a two-time Kentucky Derby winning jockey) rallied in Frankfort in favor of increased gambling.
The latter proposal isn't without it critics (after all, gambling is a notoriously regressive way to raise revenue). But proponents of the legislation are highly-organized. Wednesday hundreds of proponents of the legislation (including a two-time Kentucky Derby winning jockey) rallied in Frankfort in favor of increased gambling.
Yet,
Governor Beshear's proposals miss an important opportunity. Instead of
partially balancing the state's budget with gambling revenues,
legislators would be better off to follow the advice outlined by
Representative Jim Wayne in a recent op-ed.
Rep. Wayne details the structural problems with the state's tax system
and offers real reforms that could ensure Kentucky's tax structure is
sustainable over the long term including sales tax base broadening, new
top rates and brackets and the introduction of an Earned Income Tax
Credit.
Who should pay to fix the billion dollar hole in Kentucky's budget? One
group of lawmakers thinks low- and middle-income families, the same
families hit hardest by the economic crisis, should foot the bill.
Another group of lawmakers thinks that well-off families, the same
families who have benefited the most from the tax-cutting sprees and
the economic changes of the last several years, can afford to give
something back. A new report from ITEP shows how different the two approaches are.
Both views were on display yesterday during a meeting of the Interim Joint Committee on Appropriations, where lawmakers discussed these two very different alternatives for solving the state's anticipated shortfall for the next fiscal year, now estimated to total $996 million.
HB 51 PHS would repeal Kentucky's personal and corporate income taxes as well as its limited liability entity tax, reduce the sales tax rate from 6.0 to 5.5 percent, and broaden the sales tax base to include a variety of services. Estimates show that in future years this legislation would actually cost the state money and make Kentucky's tax structure more regressive.
The other bill heard on Thursday, HB 223, would raise tax rates for well-to-do Kentuckians, create a new income tax credit based on the federal Earned Income Tax Credit (EITC), reinstate a version of Kentucky's estate tax, and also subject a variety of services to the sales tax. HB 223 would both increase state revenues and make the state's tax structure more progressive.
For more on these proposals, read ITEP's report, Tax Reform in Kentucky: Serious Problems, Stark Choices.
Like many state tax systems, Kentucky's currently faces two serious problems. The first -- and most immediate -- is that Kentucky's tax system is insufficient. It fails to produce enough revenue to fund the public services on which Kentuckians rely. The second problem, while less pressing, is arguably more persistent. Kentucky's tax system has long been inequitable, requiring low- and moderate-income residents to pay more in taxes relative to their incomes than wealthier individuals and families. In fact, in 2007, state and local taxes as a share of income were nearly twice as high for middle-class Kentucky taxpayers as they were for the most affluent.
Ideally, lawmakers would see this situation as an opportunity. Hearings like those conducted yesterday are steps in the right direction. However, it appears that Governor Beshear is turning his head away from discussions of comprehensive tax reform. When the special session scheduled to start June 15 begins, comprehensive tax reform isn't likely to be on the table. Instead, gambling, budget cuts, and federal stimulus dollars are likely to be on the legislative agenda. Precisely because Kentucky is facing such challenges, now is the time to reform the state's tax structure. HB 223 would certainly be a leap in the right direction.
Both views were on display yesterday during a meeting of the Interim Joint Committee on Appropriations, where lawmakers discussed these two very different alternatives for solving the state's anticipated shortfall for the next fiscal year, now estimated to total $996 million.
HB 51 PHS would repeal Kentucky's personal and corporate income taxes as well as its limited liability entity tax, reduce the sales tax rate from 6.0 to 5.5 percent, and broaden the sales tax base to include a variety of services. Estimates show that in future years this legislation would actually cost the state money and make Kentucky's tax structure more regressive.
The other bill heard on Thursday, HB 223, would raise tax rates for well-to-do Kentuckians, create a new income tax credit based on the federal Earned Income Tax Credit (EITC), reinstate a version of Kentucky's estate tax, and also subject a variety of services to the sales tax. HB 223 would both increase state revenues and make the state's tax structure more progressive.
For more on these proposals, read ITEP's report, Tax Reform in Kentucky: Serious Problems, Stark Choices.
Like many state tax systems, Kentucky's currently faces two serious problems. The first -- and most immediate -- is that Kentucky's tax system is insufficient. It fails to produce enough revenue to fund the public services on which Kentuckians rely. The second problem, while less pressing, is arguably more persistent. Kentucky's tax system has long been inequitable, requiring low- and moderate-income residents to pay more in taxes relative to their incomes than wealthier individuals and families. In fact, in 2007, state and local taxes as a share of income were nearly twice as high for middle-class Kentucky taxpayers as they were for the most affluent.
Ideally, lawmakers would see this situation as an opportunity. Hearings like those conducted yesterday are steps in the right direction. However, it appears that Governor Beshear is turning his head away from discussions of comprehensive tax reform. When the special session scheduled to start June 15 begins, comprehensive tax reform isn't likely to be on the table. Instead, gambling, budget cuts, and federal stimulus dollars are likely to be on the legislative agenda. Precisely because Kentucky is facing such challenges, now is the time to reform the state's tax structure. HB 223 would certainly be a leap in the right direction.
