Lt. Gov. Abramson interview Pt. 1: Kentucky can't afford to wait to make tax changes

Kentucky leaders need to change the tax code to grow with the economy and make sure state government has the money it needs to fund programs — before it falls $1 billion off the pace by 2020, Lt. Gov. Jerry Abramson told Pure Politics.

Abramson, in his first extended interview since the commission he headed up recommended ways to revamp the tax code, said the suggestions in the final report sent to Gov. Steve Beshear on Dec. 17 represent the consensus of business leaders and social advocates who span the political spectrum.

“We are not saying every one of these items is a lay down gonna be passed by the legislature … We are saying this is the best we think, if in fact it was all implemented, for the future of Kentucky,” he said (at 1:20 of the video).

Abramson explained the commission’s reasoning for suggesting that the Kentucky General Assembly should:

• adopt an Earned Income Tax Credit (at 3:00)
• slightly cut to the corporate and personal income tax (4:40)
• spread the sales tax to some services, although the commission suggested general characteristics of which services to tax — not specific ones (6:40)

The recommendations include a mix of tax cuts and applying taxes to new areas. Abramson said slightly reducing the corporate income tax (to 5.8 percent from 6.0 percent) and lowering personal income tax (to 5.8 percent from 6.0 percent in the top rate, 5.5 percent from 5.8 percent in the next tier, etc.) can help generate more economic activity, Abramson said.

“There is an argument that says that’s not enough, it won’t spur people to go out and spend. We thought the gross number itself along with other things we are doing would ultimately create an opportunity for economic churning which would create opportunities for growth,” he said (at 6:20).

Abramson said the group tried to push the envelop as much as possible to give lawmakers and the governor who have to approve the tax changes as much political cover as possible.

“I remember one of the state legislators, who happened to be a Republican, saying better to be way out there in terms of what we think is right because ultimately the legislature and the governor will roll it back to what is doable” (at 9:15).

And ultimately, he said, what’s at stake is the ability of the state to keep up with the economy and adequately fund education, health care and public protection programs for Kentuckians and keep up with the obligations for state employee health care and retirement payments.

“The consultants said if we do nothing, by the year 2020 we will need to cut an additional billion dollars from the budget. So there is no question that one of the issues the governor charged us with was the issue of adequacy,” Abramson said (at 10:00).

(Part 2, which will be online later Monday, focuses on how to pass such legislation and how Gov. Beshear can use his political capital to push for it. And watch Pure Politics on Monday to see the third part of the interview in which the lieutenant governor fields questions on other issues. That’s 7 p.m. Eastern/6 p.m. Central and 11:30/10:30 on Insight’s cn|2.)