Tax reform commission gets lessons in the graveyard of studies past

04/10/2012 04:43 PM

Like in politics, timing is everything when it comes to tackling massive reforms to the tax code.

That was the theme of the second meeting of the 19-member of the Blue Ribbon Tax Commission that Gov. Steve Beshear created to recommend ways to revamp the system. The group spent Tuesday afternoon looking at what went wrong with previous tax commission reports and why no major changes were made.

“Everybody says we’ve had all these studies before. Well we have, we’ve had several. Question is so what happened as a result of the studies,” Lt. Gov. Jerry Abramson told the commission as he handed the meeting over to Greg Harkenrider, the deputy executive director for economic analysis, to break down why the studies often never went further than making recommendations.

Harkenrider started by offering a word of warning to the commission saying, “very few tax reform changes help everything across the board. Especially ones that bring in money.”

The group looked at prior reform efforts from 1982 through 2006. Harkenrider explained who requested the studies and for what reasons and why the recommendations failed. The most common problem was timing – political and economic. And in the case of the 2003 study under then-Gov. Paul Patton, it was too far reaching.

He called the 1995 tax commission report one of the best conducted for Kentucky.

“You look at it and you say man we’re going to recommend a lot of the same stuff we recommended back in 1995,” Harkenrider said.

So, why did the legislature never pass any of the reforms?

Its recommendations came out just before Gov. Brereton Jones left office and Gov. Paul Patton took over and wasn’t an immediate priority of the new governor.

Also “money was good enough that none of them never got adopted. The urgency of it it did not fit politically at the right time,” Harkenrider said.

In 2003 — another gubernatorial election year — Gov. Paul Patton looked at eliminating the corporate income tax, and raising the cigarette tax, among other proposals.

Again, nothing passed.

“It was a pretty big cut at it, and sometimes when you make a big cut at it and try and hit a home run maybe it takes a second third shot at it,” Harkerider told Abramson.

Commission members, who include social service and education advocates as well as business leaders, also spent part of the meeting catching up on tax issues and lingo before the commission turns into a rolling road show across Kentucky this summer.

The commission also will soon name a consultant to help guide the group through the process on the way to making recommendations by Thanksgiving. The group had hoped to do that before Tuesday’s meeting. But Abramson said it’s taking longer than expected, although he hopes one can be hired before the May meeting.


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