Lawmakers say they're willing to take up tax reforms in special session, but Gov. Bevin will have to do the heavy lifting

02/27/2017 02:13 PM

FRANKFORT — Without tax and pension reforms, Gov. Bevin says the state will be “financially insolvent,” many lawmakers agree there needs to be work done now, but a lot of the burden of reform will fall to Bevin.

Four Republican lawmakers participating in a Cable Day Forum with Spectrum News signaled a need for the reforms, but cautioned that the package would need to be revenue neutral in order for their support.

Senate Budget Chair Chris McDaniel, R-Taylor Mill, acknowledge the potential political ramifications of the General Assembly voting on tax changes, but said the “scarier” thing would be to take a vote “that lets us watch businesses and individuals and businesses flee across the borders.”

“We’ve got 65 percent of our population lives on a border in this commonwealth, and if we become uncompetitive you will see them migrate across the borders, it’s that simple,” he said.

For some, like Rep. Diane St. Onge, a Republican from Lakeside Park, they see an opportunity with tax reform to begin the work that will “continue over future generations” to address the shortfall in pensions.

In his State of the Commonwealth address Bevin said the state needs to move from a production-based tax code to a consumption-based system and that every tax expenditure would be up for consideration.

Bevin indicated during his speech that he will call a special session to address pension and tax reform at the same time. The plan, which Bevin indicated during his speech is already underway behind the scenes, would not be revenue neutral.

“We can’t afford for it to be,” Bevin said. “We cannot pay off eight times what we bring in if we simply reshuffle the deck.”

Lawmakers have taken a different tune for a revenue generating tax proposal.

“I think the general sentiment, at least in the Senate, I assume in the House, is that we’re looking for a revenue neutral tax package,” McDaniel said last week. “That doesn’t mean that ultimately you won’t generate more revenue, and you might generate it in short order.”

McDaniel, and other Republicans have taken the position that by crafting the tax code in a way to incentivize businesses to locate in Kentucky, that employees would follow which in turn would broaden the tax base and bring in more revenue.

Whatever the plan is, Rep. Adam Koenig, R-Erlanger, said that it will be tough work for the General Assembly, but he imagines Bevin will “have to hit the road for a month or two, and sell this in every corner of the state.”

Koenig is also calling on lawmakers to consider “filling the hole” with revenue from expanded gambling.

“That’s another way of raising revenue without raising anybody’s taxes, and I want to put that back out on the table,” he said, adding that it would not be a silver bullet to completely fix the problem.

As lawmakers consider state tax reforms, the cities and counties across the state are also asking for reforms at the local level.

At the local level there are “restraints” as they’re described by the Kentucky League of Cities Deputy Executive Director J.D. Chaney. Lifting that barrier would mean a constitutional change from the General Assembly.

Currently most revenue coming into cities is based on occupational taxing, Chaney said, adding the tax is a tax on “productivity.”


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