Tax reform overdue in Kentucky

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We passed the one-third mark of the 2014 Regular Session this past week, and one of the highlights was the unveiling of the Governor’s proposal for comprehensive tax reform in Kentucky.

The Commonwealth has not tackled tax reform since 2005, when Governor Ernie Fletcher proposed updating some of Kentucky’s tax code, which was referred to as tax modernization.  While that legislation had some impact, full tax modernization has not been passed by the General Assembly for decades.

The wheels of progress on bringing Kentucky’s tax code into our 21st Century economy have been at two speeds: slow and stop.  Numerous administrations have put together studies on revamping our tax system, and the only attention they mustered was to gather dust on a shelf somewhere in the Capitol.

It has taken two years for the current administration to propose a tax system overhaul plan from the first meeting of its blue ribbon panel to study our tax code and make recommendations.  Among the ideas put forth by the Governor include:

• Lowering Kentucky’s corporate tax rate by one-tenth of a percent, 6.0 to 5.9.

• Raising sales tax on a pack of cigarettes to $1.

• Establishing an angel investor tax credit for those who invest in startup companies.

• Providing a tax credit for Kentucky’s bourbon industry.

• Expands sales tax on services to include commercial and residential services.

On first blush it appears the Governor’s tax proposal does nothing more than expand the Commonwealth’s revenue base with few tax reductions.  While there are parts of the plan I cannot endorse, I do agree with the call by House Republican Floor Leader Jeff Hoover for the House and Senate to put together a small group of legislators with the goal of reaching a compromise on tax reform to, in his words, “…not delay it another year or allow it to be the subject of petty political games…”

While we have sat on tax reform for the last 30 or so years, surrounding states like Indiana and Tennessee have passed us by, due in large part to making their states more business friendly by updating their respective tax codes.  In 1970, Kentucky and Tennessee were mirror images of population and business climate.  Now the Volunteer state has dramatically grown their population, and their economy has prospered thanks in part to tax reform.

We simply cannot wait any longer to tackle this important issue.  Instead of passing bills that serve only to hurt small business and the people they employ, government’s role should be to help them grow and provide more jobs.  Passing a comprehensive tax reform bill is simply good government in action. 

I can be reached through the toll-free message line in Frankfort at 1-800-372-7181 or you can contact me via e-mail at brian.linder@lrc.ky.gov. You can keep track of committee meetings and potential legislation through the Kentucky Legislature Home Page at www.lrc.ky.gov and I also encourage you to follow the House Republican Caucus on Facebook and Twitter.

 (Representative Brian Linder (R) House District 61 Gallatin, Grant and Owen counties.)