Progressives say legislature missed an opportunity when it approved bourbon and alcohol tax breaks

04/02/2014 04:59 PM

The Kentucky legislature adopted the tiniest sliver of a tax reform plan on Monday as part of its revenue bill that accompanied the state budget.

The measure included several recommendations that were part of the proposal from a blue ribbon commission of business leaders and health and education advocates in 2012, which was headed by Lt. Gov. Jerry Abramson.

Among the provisions that quietly slipped into the revenue bill amid closed-door negotiations over the weekend were three tax breaks that were in the reform recommendations: – a tax incentive for investors to put money into Kentucky start-up companies, known as the “angel tax incentive.” – a tax break on the levies placed on bourbon barrels that are aging in Kentucky distilleries. – a tax reduction on the wholesale price of beer and liquor.

Abramson told Pure Politics senior reporter Don Weber on Wednesday that the surprise inclusion of those provisions was a mixed bag. While it’s good the General Assembly saw wisdom in those recommendations, he said, they cut taxes at a time when Kentucky needs more revenue.

The blue ribbon commission’s recommendations initially would have raised more than a half-billion dollars a year in extra revenue. The General Assembly already cannibalized a small part of the plan to come up with money last year to help make the state’s full payment into the Kentucky Retirement System.

Abramson said he still hasn’t given up hope for the approval of a major tax reform package that, among other things, would lower some income tax rates and spread out the sales tax to certain services.

Jason Bailey, director of the Kentucky Center for Economic Policy, said approving those tax breaks by themselves removes potential deal-sweeteners for a wider tax reform package that should include a mix of increasing some taxes while lowering others in order to allow Kentucky’s revenue to grow better with the economy.

Not only that, but groups that have been pushing for those breaks — like the bourbon industry — might now disengage from lobbying efforts to encourage lawmakers to embrace a wider package, said Bailey, who was a member of the nearly two-dozen Kentuckians on Abramson’s blue ribbon commission.

Bailey, who runs the progressive think tank, offered his take on the effect of the tax cuts and of the $20 billion two-year spending plan lawmakers approved during an interview with Pure Politics on Wednesday:

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