The bottom line is that Kentuckians are unlikely to see their taxes go up; schools and the Medicaid program will be spared any budget slashing; and universities will scramble to offer a counter-proposal to Beshear to perhaps avoid deeper cuts.....
Beshear said the presentation of gloomy numbers was not a ploy to build support for his casino proposal, which he says could eventually bring $500 million in revenue to the state per year.
The other part of the bottom line is that the Kentucky General Assembly will continue to wimp out when it comes to serious budget reform. The interests of millionaires will continue to be pushed by the Governor and some members of the legislature.
Here are two things that they should do:
One, raise the cigarette tax:
In 2005, the legislature raised the tax on a pack of cigarettes from 3 to 30 cents. Although it's still among the nation's lowest -- the average is $1.07 a pack -- Kentucky's tax on cigarettes and other tobacco products is expected to bring the state $182 million this fiscal year, up from about $17 million under the old rate.
We could reasonably expect the revenue to increase by at least another $200 million and we might even reduce the number of smokers which would then eventually reduce the drain on Medicaid.
But, that would take more than two years which is the visionary limit of most of the legislature.
Two, bring a little sanity to the current system.
This doesn’t even come close to a comprehensive tax reform but it would make a very good first step. In the 2007 General Assembly, Rep. Jim Wayne introduced this bill that died in committee. Wayne says he intends to introduce this bill in the 2008 session.
Last year's version of the bill, which died in committee, would have raised up to $400 million a year, Wayne said.
HB 411/FN (BR 1777) - J. Wayne
AN ACT relating to taxation. Amend KRS 141.020 to increase the tax rate on income over $75,000; amend KRS 141.066 to establish a refundable earned income tax credit at 15 percent of the federal credit; amend KRS 140.130 to decouple from the federal estate tax phase-out; amend KRS 139.200 to include a list of selected services as subject to sales tax; amend KRS 141.0205 to recognize changes to income tax credits; make income tax provisions effective for tax years beginning on or after January 1, 2006, make estate tax provisions effective for deaths on or after August 1, 2006; make sales tax provisions effective for billings on or after August 1, 2006.
Among the things the bill would have done the following:
Increase to the income tax to seven percent (7%) of the amount of net income over seventy-five thousand dollars ($75,000) and up to ninety thousand dollars ($90,000); and eight percent (8%) of the amount of net income over ninety thousand dollars ($90,000).
According to the U. S. Census Bureau the estimated average median family income, adjusted for inflation, in Kentucky in 2006 was:
2-person families ------------42,278
3-person families ------------50,663
4-person families ------------60,202
5-person families ------------58,556
6-person families ------------59,437
7-or-more-person families --55,390
So this tax increase doesn't even get close to touching most Kentucky families.
Wayne also wants to tax the sale of admissions, including golf course greens fees and membership fees in private golf or country clubs.
The bill would also have taxed services on janitorial services, including carpet, upholstery, and window cleaning, garment alteration and repair services, non-coin-operated laundry and dry-cleaning services, armored car services, security services, exterminating and pest-control services, chartered air flight services if a pilot is furnished, including hot air balloon flights, landscaping services excluding lawn-care services, non-coin-operated automotive washing services and waxing services, commercial linen services, excluding commercial uniform services and commercial linen services provided to hospitals and nursing homes and limousine services if a driver is included.
So Wayne’s bill was directly aimed at the most affluent in Kentucky.
He wants to tax luxury services. The impact on the average Kentucky household would have been minimal.
Yes, the taxes would have been passed back to the consumer. And he wants to raise by a couple of points the tax on the net income, not gross income, of the wealthiest in the Commonwealth.
Do you really think the guy making a 6 figure income is going to quibble about a service tax when he is taking a limo to his country club?
So the other part of the bottom line is that we could produce more money with a little sane tax reform and without casino gambling.
The main ingredient lacking is a little intestinal fortitude by our leaders.