Tax Reform Commissioners Need to Consider What is Best for All of Kentucky

Tuesday’s meeting of the Governor’s Blue Ribbon Commission on Tax Reform was disappointing. Walking into the conference room, you would have noticed the 15 or so easels with boards containing 95 options for tax reform. The Commissioners added a 96th option during the meeting. Including Tuesday’s meeting, the Commissioners have three, four-hour meetings to par that list of 96 options into a cohesive plan of recommendations for reforming Kentucky’s tax system. Options range from applying the sales tax to pre-written computer software to enacting a state Earned Income Tax Credit (See the beginning of this document for the entire list of options).  Each board contained topic areas including: individual income tax, corporate taxes, sales and excise taxes, property taxes, and severance taxes.  There’s a lot of material to cover by the time the recommendations are due November 15. According to an article in the Courier-Journal, Lt. Governor Abramson might ask for an extension.

Commission staff derived the 95 options from the public hearings, the consultant recommendations, and all were tested against the Governor’s principles for tax reform: fairness, competitiveness, simplicity and compliance, elasticity, and adequacy. The Kentucky Center for Economic Policy has analyzed several of the options.

To probably no one’s surprise the meeting turned into an extra-long discussion of special interests and personal preferences, clarification of obscure options from the state budget and revenue offices, and some substantive debate on  whether the charge of the Commission was to help make Kentucky more competitive for business, or to help alleviate the tax burden on low-income families. When the commissioners began suggesting options for elimination, it sounded like a BINGO parlor while they shouted “87!” “93!” “Number 5!” The commissioners finally agreed to eliminate several proposals, including placing a 6 percent sales tax on food bought at grocery stores and implementing a back-to-school sales tax holiday.

A lot of the debate has to do with what makes Kentucky business-friendly. Different people have different opinions. Many factors affect where businesses locate – including the quality of infrastructure, like roads and public parks, the quality of public schools and how well-educated the employee base is.

The commissioners have a serious charge – to think about what is best for all of Kentucky now and in the future. This includes ensuring a fair, competitive, adequate system. It is imperative Commissioners set aside their personal connections and notions and focus on what’s best for the state as a whole. This doesn’t mean preserving obscure tax breaks that help a small percentage of Kentuckians in a race to the bottom. This means being thoughtful and creative in a way that ensures our tax system meets the needs and the vision of us all to create a more prosperous Kentucky.

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