Governor Beshear and the umpteenth rebirth of tax reform

01/07/2014 06:36 PM

Woven into the middle of the governor’s State of the Commonwealth Address on Tuesday night were the biggest hints yet about what Gov. Steve Beshear is planning to propose as part of a tax reform package this session.

Beshear told the lawmakers he will “present to you this session a tax modernization proposal with specific recommendations on how to move our tax system into the 21st Century.” And he asked lawmakers to “engage with me” on it.

In general, Beshear mentioned lowering the top individual and corporate income tax rates and spreading out the sales tax to certain services and increasing taxes on retirement income.

If those broad themes sound like they were lifted from the December 2012 report from the task force headed by Lt. Gov. Jerry Abramson , well they were.

And as the governor mentioned, the conclusions of that report were similar to the dozen previous studies of Kentucky’s tax code undertaken since 1982. Beshear compared the lack of action on those previous recommendations to a person with “a serious health condition” ignoring the opinion of 13 doctors.

Other details of the plan Beshear dropped into the speech include:

- including a constitutional amendment for a local option sales tax to allow communities to vote on a sales tax increase designated to funding a specific project.

- establishing a tax credit for angel investors to put up money for start-up companies.

- Expanding a research and development tax credit to include human capital.

- And changing the code to give Kentucky-based industries tax advantages.

For anything to pass, though, Tuesday night’s speech would have to be only the beginning of the governor’s lobbying effort.

Legislative leaders, including Senate President Robert Stivers and House Speaker Greg Stumbo, have been saying that the governor must take the lead and lay the political groundwork.

The tax reform section of the governor’s speech followed a list of what Beshear termed areas of progress and before Beshear’s warning about challenges, chiefly education funding. That call for funding likely will be a part of Beshear’s efforts to drum up support, as his remarks to reporters in December indicated.

Beshear at least acknowledged the political challenges of taking on the tax code in 2014.

“I realize that tax modernization is a sensitive topic, especially in an election year,” he said. “But the people elected us to tackle difficult issues.”


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