Gov. Steve Beshear presented his 22-point “Kentucky Competes” tax proposal Tuesday, hoping to jumpstart talks on the politically sensitive issue with one-third of the 60-day legislative session completed.
Besher’s plan relies heavily on broadening the sales and retirement tax pools as well as raising the cigarette tax from 60 cents to $1 per pack to generate a combined $580.7 million in new revenue once fully implemented.
At the same time, “Kentucky Competes” would lower the individual and corporate tax rates while offering an earned income tax credit worth 7.5 percent of its federal counterpart. It would also implement a variety of tax breaks for Kentucky-based businesses and signature industries.
In all, Beshear’s plan would eventually bring in $209.8 million in new tax revenue, Beshear said. That would cover the structural imbalance in Kentucky’s biennial budget, he said, while the first two fiscal years in the coming biennium would see more revenue initially — $326 million in fiscal year 2015 and $291.6 million in 2016.
The proposal would extend the state’s 6 percent sales tax to include additional services such as car repair, computer installation and repair, landscaping, janitorial work and pet care. Beshear’s plan would also tax admission to fitness centers, golf courses, country clubs and overnight trailer campgrounds.
“Kentucky Competes” is a fair, equitable start to developing a modern tax plan for the state, Beshear said, but he acknowledged the challenge of maneuvering such legislation through the General Assembly with elections looming in November.
Beshear briefed Democratic and Republican leaders in the legislature of his proposal and said he sought no commitments during the meetings. In fact, Beshear said he only wants his tax proposal voted on once consensus had been reached between House and Senate leadership.
“We’ve got to find common ground if we’re going to have any success here, and this’ll be a difficult process, no question about it,” Beshear said. “I can guarantee nobody that we’re going to have success here, but I can guarantee you this: If we don’t have a proposal out here and start talking about it, we won’t have any success.
“I’m confident that everybody is going to take this seriously and is going to sit down and have some very serious, deliberate discussions,” he continued.
If tax reform is unsuccessful, the two-term Democratic governor said he would pursue the issue through his remaining time in office.
House Speaker Greg Stumbo, D-Prestonsburg, called the prospects for passing a tax reform package that raises nearly $210 million in new revenue “daunting.”
Stumbo singled out the state earned income tax credit as one component of the plan and questioned the need for tax breaks for bourbon companies considering their “record profits.”
Still, it’s too soon to say what tweaks will be offered as the plan moves through the General Assembly.
“It’s too hard to tell,” Stumbo said. “You can pick out certain pieces of it and I guarantee you right now you can find a few members against or for, but the way you have to consider it, I think, is look at the package in total and tell me how much of it you could support if the package were to pass at least basically intact.”
Senate President Robert Stivers, R-Manchester, said at first blush, Beshear’s plan seems like “a raw tax increase.” He has previously said he wanted a reform package that increases job growth without raising an individual’s tax liability and has requested the proposal be scored to reflect such impact.
“I think it would be very hard to convince the Speaker that their chamber’s going to pass that,” Stivers said. “… We’ll wait and see. We’re going to have the discussions and go from there.”
Many of the 22 proposals in “Kentucky Competes” originated from Beshear’s tax reform commission chaired by Lt. Gov. Jerry Abramson.
Rep. Rick Rand, D-Bedford, will file a vehicle bill for Beshear’s tax proposal, though he declined to support “Kentucky Competes” outright. “I’m not going to say I support this part or that part because I think my role will be to facilitate those types of discussions,“ the House Appropriations and Revenue Committee chairman said.