With sales tax income dropping, Lt. Gov. says it's time to spread it to luxury services

08/14/2013 10:33 PM

The sudden drop in sales tax revenue might be a head scratcher for state economists, but it’s also a warning sign that Kentucky must revamp its tax code to keep up with the modern economy, Lt. Gov. Jerry Abramson said.

“Over half of the states in the union have decided that services are the area that’s growing in our economy. And therefore, services should now have a sales tax attached to them … We looked at those 28 or 30 states that have sales taxes on services and found that most of them started with luxury items,” Abramson said.

Total sales tax receipts for the 2013 fiscal year that ended June 30 were $3.021 billion, down from $3.052 billion the previous year. Even during the lowest point of the recession Kentucky never saw a year-to-year drop in sales tax income. Other states are seeing it too, according to the Wall Street Journal .

Abramson spent much of last year working with business leaders and education and health advocates on a blue ribbon commission examining tax reform. Some of those recommendations served as a foundation for money for the pension reform bill lawmakers passed in March. But the rest of the suggestions, such as expanding the sales tax and lowering income tax rates, haven’t been touched yet.

Abramson offered a few clues as to how the administration plans to drum up support for tax reform — and it doesn’t include rallies in the Capitol Rotunda. (4:45)

And while Abramson said he wants to see Kentucky bring in more revenue for education “the sooner the better,” he said the most important outcome is to make sure the tax code grows with the economy over the long term. (6:30)

And Abramson says in terms of where state dollars go, education is the area that is being left behind and he would like to see aggressively tackled in the 2014 session.

“The pie has got to get bigger,” Abramson said (at 8:07 of the next video). “When you put education—that’s k-12 as well as community colleges and universities— and you put corrections and you put healthcare, that’s 80% of the budget.”

Abramson announced last week that he would not run for governor in 2015 saying he wanted to focus all of his energy on education which is what he aims to do moving forward.

He said he does not know what his departure from the 2015 does for other Democrats who are still looking at the race, but he said he hopes that the next governor of the state as well as the state legislature make a real effort to change things in the area of education.

“My belief is so strongly focused on we simply need to invest in education,” Abramson said (at 7:00). “Our generation will be literally judged by how well the next generation does.”

This segment starts with a discussion about Abramson’s decision not to run for governor:


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