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KY Budget Crisis Solutions Placed on the Table

February 4, 2009

Frankfort, KY – Kentucky's budget-balancing act is featuring more options. Increasing the cigarette tax, budget cuts, and video gambling are already being debated, and a new set of possible moves has just been placed on the table, including updating the tax code, which is now actually regressive.

The poorest working Kentuckians at present pay a tax rate of 10 percent, the richest pay six percent. Those are the state's tax facts from the Kentucky Legislative Research Commission – and they're at the basis of the new proposal to help fix the half-billion-dollar budget shortfall without resorting to another round of the budget ax. State Representative Jim Wayne is the chief sponsor of the plan to reform the tax code, adding a fractional tax increase to those with tax burdens in the six percent range so as to come up with what he calls a fairer tax system.

"We now have a real unjust system, where the rich people are getting off with paying a lot less taxes, percentage-wise, than working-class people and poor people."

Wayne also points to studies the state looked at in 2001 that warned of severe revenue shortfalls because the tax structure wasn't designed to keep up with growth, or even with average rising expenses. He says economic good times got the state through until now.

Critics of the proposal say raising taxes during a recession is never a good idea.

Kentuckians for the Commonwealth chairman K. A. Owens however says this is an opportune time for comprehensive tax reform.

"The fact that we're in a national and international economic crisis is not an excuse for a failure to act. We should rise to the challenge."

The package presented Tuesday also includes extending sales tax to certain services utilized by those on the upper end of the income scale, such as pilot services; a restoration of the estate tax; and a State Earned Income Tax Credit to make the tax burden a little lighter for those who earn the least.

Deborah Smith/Deb Courson, Public News Service - KY