Ky. lawmakers of both parties warn against tax changes that raise bills on middle class

12/14/2012 03:29 PM

As the governor’s tax commission prepares to release its final report on Monday, lawmakers say they’re skeptical of any changes that might raise the tax burden on the middle class.

But one business leader who served on the commission argued that the recommendations will make the tax system more fair.

John Williams, the founder of Computer Services, Inc., in Paducah, told Pure Politics this week that the proposals would make the tax code fair and better able to keep pace with the economy. By suggesting lower corporate and income tax rates and spreading the burden by applying sales taxes to certain services that currently are untaxed, it will allow state revenue to grow with the economy, he said.

He also said an Earned Income Tax Credit, which would put some money back in the pockets of low-wage earners, would help prevent the changes from being too regressive.

As for the middle class, the recommendations will include slightly lowering the individual income tax rates. For most Kentuckians — those earning between $8,001 and $75,000 — the group suggested a drop in rates to 5.5 percent from 5.8 percent.

Still, House Speaker Greg Stumbo said he was concerned with a related recommendation that would cap the amount of deductions individuals could take. The group proposed a $22,500 limit on deductions, such as for tuition and mortgage interest paid over the course of a year.

Here’s what Stumbo said during his remarks to the Kentucky Chamber of Commerce earlier this week:

Sen. Damon Thayer, R-Georgetown, told business leaders attending the chamber’s meeting on Monday that he wants to study the recommendations.

But he promised the Republican-led Senate wouldn’t go along with any proposals that would cause “a big redistribution of wealth in Kentucky.”

Thayer co-chaired a separate legislative task force that proposed addressing the woefully underfunded state employees pension system by boosting the state’s payment into the system from about $500 million to $820 million in 2015. That’s the amount the state should be paying but recent governors and General Assemblies have shorted that amount.

Still, Thayer, unlike other officials in Frankfort, didn’t say the pension funding crisis increased the urgency to make changes to the tax code.

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