Governor's proposal would cut gas tax, close loopholes and change deductions

03/25/2013 01:09 PM

UPDATED — Gov. Steve Beshear’s proposal to lawmakers for tax changes that would help generate more money to fund public pensions would include a 2- cent-per-gallon cut in the gas tax.

That would cost $61 million starting in July 2014.. Increasing the standard deduction for individuals would cost the state another $7 million.

But it would be offset by eliminating a personal tax credit of $20 that would save the state $65 million. Another $22 million would come from closing several “loopholes.” That amount would go up to $26 million in future years, according to a summary document of the proposal.

The biggest chunk of that comes from taxing corporate management fees the same as other expenses, which will bring in $15 million. Taxing out-of -state companies for Internet sales could bring in another $3 million in fiscal year 2015 and $5 million after that. Other smaller changes would bring in another $4 million.

UPDATED: Beshear emerged from a two-hour meeting with House Democrats to discuss the proposal. Beshear said he initially proposed the ideas and has been going back and forth with legislative leaders over the last 10 days.

He said they had a productive meeting but there is no deal yet. He wouldn’t characterize how House Democrats received the plan but said he’s still hopeful a deal will come together by 11:59 p.m. Tuesday.

Taking two cents off the gas tax could be politically palatable for some lawmakers who want to avoid voting for a naked tax increase. But House Democrats have traditionally voted to protect the road fund to pay for key projects in their districts.

One note on the gas tax, though. It is scheduled to go up automatically by more than 2 cents per gallon this summer because of a provision that requires it to go up when the wholesale price of gas remains over a certain level, which it has since 2004.

The proposed cut would take effect in July 2014 when the next scheduled automatic increase would take effect.

As for the pension reforms themselves, the compromise being discussed would keep the hybrid cash balance plan for future hires that the Senate’s version of the pension reform bill contained. That would be for new hires after Jan. 1, 2014.

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