Daily Independent (Ashland, KY)

December 19, 2012

The next step

Proposals of tax commission need full support of governor

The Independent

ASHLAND — The Governor’s Blue Ribbon Commission on Tax Reform, chaired by Lt. Gov. Jerry Abramson, has completed its work and sent its recommendations to Gov. Steve Beshear. It is now is up to the governor to decide to use his political muscle to help get at least a portion of the commission’s recommendations enacted into law or to do little or nothing and help ensure this is another in a long line of tax studies  to be largely ignored and soon forgotten.

If all the commission’s final report does is gather dust on some shelf in Frankfort, then the months of work and lively debate by a lot of smart people will have been wasted. Again.

Most elected officials in Frankfort agree Kentucky needs to modernize its tax code to make is fairer, simpler and more responsive to the modern economy. The problem with turning those goals into law is that many people equate tax reform with tax increase. They see reform proposals as just another way of forcing them to pay more state taxes.

To be sure, if all the recommendations of the Commission on Tax Reform were enacted, many would be paying more in state taxes. In fact, Abramson predicts if all the changes recommended by his bipartisan committee of tax experts were approved, they would generate about $659 million in additional state revenue a year. Any which way you look at it, that’s a tax increase, plain and simple.

But the recommendations also would lower individual and corporate tax rates. More importantly, Abramson says the changes “would position Kentucky to create more jobs, further grow our economy and fund many of the services the commission heard were needed all across the commonwealth.”

The changes would create a fairer tax code for families and businesses. If Abramson can convince legislators and ordinary Kentuckians of that, the proposals would have a far greater chance of being adopted.

However, Abramson is not the key figure in getting the proposals through a reluctant General Assembly. Governor Beshear is. For the tax reforms to be approved, Steve Beshear must put all the political muscle he can muster behind a specific plan and not back down. Unfortunately Behear’s initial response to the report of the Commission on Tax Reform was not encouraging.

To be sure, the governor praised the group for its efforts to propose a tax code that’s fairer, simpler and more responsive to a modern economy, but he then said, “I will review this report and will discuss the findings with legislators as we seek ways to make sure our state has the resources it needs to meet the needs of our people.”

What a wishy-washy statement! While it will be up to lawmakers to decide the fate of the commission’s proposal, the governor — even a lame-duck one like Beshear — has the power to influence legislators to support his proposals. That would require back-room deals and political arm-twisting, but that’s the way things get done in Frankfort.

The commission recommends more than 50 proposals, including lowering the state’s top corporate tax rate to 5.8 percent from 6 percent. Individual income tax rates also would drop from 5.8 percent to 5.5 percent for adjusted gross income between $8,001 and $75,000. For income of $75,001 and higher, the rate would fall from 6 percent to 5.8 percent.

The commission renewed an old idea by proposing broadening the state sales tax to selected services. The group didn’t single out any specific services in its report, but suggested the tax apply to services that are household- or consumption-based or apply to luxury items.

We do not agree with all the proposals, but the recommendations are an excellent starting point for a vigorous debate on tax reform, one that will result in meaningful action.

As we stated in an earlier editorial, tax reform has the chance of becoming Steve Beshear’s greatest legacy as governor and one of turning what has been to date a dismal record of getting his ideas adopted by the General Assembly to one of the record of leading the way to real and meaningful change. To do that, the governor must be more assertive and aggressive than he has ever been before.