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Seeking Tax Fairness out of Tax Reform

PHOTO:  A member of the governor's tax-reform panel says proposed changes will make the state's tax codes more fair.
PHOTO: A member of the governor's tax-reform panel says proposed changes will make the state's tax codes more fair.
December 11, 2012

FRANKFORT, Ky. - Recommendations for overhauling Kentucky's antiquated tax code are on their way to the governor. One member of Governor Steve Beshear's Blue Ribbon Commission on Tax Reform hopes lawmakers see the report as an "opportunity" to make "historic changes in Kentucky's trajectory."

Jason Bailey, who is director of the Kentucky Center for Economic Policy, says the proposed reforms would make the income tax "somewhat fairer." Low wage earners would receive a refundable tax credit.

"So we're asking more of those who are more able to pay, for the most part."

Limiting itemized and retirement income deductions is part of the plan to raise new revenue for the state. About $500 million of the nearly $700 million in new tax revenue would come from changes to the income tax structure.

Bailey says that's a "key part" of reform because the state has suffered $1.6 billion in budget cuts in recent years.

"This doesn't even begin to make up for all of that, but puts us on a greater path. We have to be putting more money into education, into health care and human services, into other quality-of-life investment."

However, the commission's recommendations include around $100 million in corporate tax cuts. Brian Sunderland, with the Kentucky Chamber of Commerce, calls that "a big win" for business. Bailey claims it's "unnecessary."

"Business tax cuts are really a race to the bottom between states."

Instead, Bailey says, those taxes should be invested in education and infrastructure. Sunderland says the tax cut addresses an "injustice" to current companies who want to make more investments.

Modernizing the state's tax code has been talked about for years. Now that a concrete plan has been sent to the governor, what he and lawmakers do with it will be the real litmus test. Bailey hopes Kentucky's leaders step above "the influence of lobbyists" and their own short-term political concerns.

"This is a chance for them to make a difference that will help people's children, that will help their schools, that will help their economic future. And if they explain that to their constituents I think they can win their support."

Lawmakers return to Frankfort in January for the 2013 session.

Greg Stotelmyer , Public News Service - KY