Consumption based taxing structure would be "tax shift" not tax reform, KCEP says

04/24/2017 03:47 PM

Revamping the state tax code in order to generate new revenue to pay down pension debt is being discussed by the executive branch, but how the state gets there could be “very problematic” depending on the actions taken, according to one economic advocate.

Jason Bailey of the Kentucky Center for Economic Policy said a shift to a consumption based taxing model, which has been floated as a potential change to the tax code, will cut taxes for the wealthy and shift more burden to the lower and middle class.

“I wouldn’t call it tax reform — that sort of approach is more of a tax shift,” Bailey said of moving to a consumption based model.

Not only does Bailey think shifting the taxing structure towards a consumption model would be unfair, but he also said it will affect revenue in the state.

“If you have an economy with sort of rising inequality and you’re talking those people whose incomes are growing less — you’re going to have less revenue,” he said. “If the whole exercise of tax reform is to generate revenue … that’s exactly the wrong approach.”

Bailey said state’s that have shifted to a consumption based taxing model have faced budget shortfalls, credit downgrades and cuts to vital areas like education.

“That’s a really different philosophy,” he said of consumption taxing. “It’s very concerning. If that’s the framework we won’t have something that will address the real problems and move us forward.”

As a member of the 2012 Blue Ribbon Commission tax commission, Bailey said that work group attempted to “close loopholes” and end exemptions across the tax code “to make it more fair and generate more revenue.”

Hear what else Bailey has to say about tax reform, including why a grocery tax would be regressive for low income earners in the interview below.


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