Taxes do little for shortfall

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By The Staff


R-House Dist. 58

The legislature approved last week a rescue plan to plug the projected $456 million hole in the state budget this fiscal year with a combination of new revenue, spending cuts and fund transfers. The plan, which was passed by the House on Wednesday and cleared the Senate Friday, is contained in two bills that House and Senate leaders were able to reach consensus on in recent weeks. The bills will take effect immediately upon Governor Steve Beshear’s expected signature.

Even though the majority of debate was spent on HB 144, which raises new revenue, the measure only accounts for a little more than 10 percent of this fiscal year’s projected shortfall. I was still weighing my decision on the revenue increases, and in the end, I decided against more taxes. Voting for the tax would have done little to solve the immediate shortfall, especially when it seems other options were available that could have closed the budget gap instead of raising taxes. In the future, we must find a way to both spend money more efficiently and to better fund our needs.

The rest of the shortfall reduction plan is contained in the second measure passed by the House and Senate, HB 143. Lawmakers were able to avoid using coal severance dollars, tobacco settlement funds or state employee furloughs – all proposals floated by the governor – as part of the plan, but did authorize cuts elsewhere. The bill would specifically allow the governor to cull around $147 million in savings from planned 4-percent executive branch spending cuts and authorizes up to 4-percent cuts in both legislative and judicial branch spending.

In what was perhaps the most important development of the week, the Speaker committed to hearing debate on two House bills regarding the state’s tax structure, both of which would affect most Kentuckians. Rep. Jim Wayne’s HB 223 calls for a more progressive tax structure where the wealthy would pay more along with retention of the estate tax. Rep. Bill Farmer’s HB 51 proposes to extend the sales tax to services and eliminates the corporate and personal income taxes.

During the past few years, the legislature has worked to cut waste from areas in the state budget. However, it is time we reviewed the entire tax code and government spending so that we do not find ourselves facing shortfalls each year. I believe we need to do a better job of recognizing what the core duties of state government are and then funding those activities well. At the same time, we must identify and cut programs that, while they may be good, are not crucial to government’s role.

Throughout this process, one of our main goals must be to maintain our competitiveness with surrounding states. Kentucky must be job friendly, enticing companies to open businesses here and to employ our people. This is a very important discussion and the timing is critical.

If you have any questions, I may be reached at 1-800-372-7181. Those with hearing impairments may leave messages for me by calling the TTY Message Line at 1-800-896-0305.  You may also e-mail me at brad.montell@lrc.ky.gov.