Group calls for tax overhaul

FRANKFORT — A coalition of social service and nonprofit groups called on Gov. Steve Beshear Thursday to push for comprehensive tax reform as a long-term fix to the state’s ongoing budget woes.

The announcement came on the same day that legislative leaders said a special joint meeting of the House and Senate budget committees on June 4 will hear testimony on two tax reform bills.

Still, it remains unlikely that major tax reforms will be passed during a possible special legislative session this summer. Gov. Steve Beshear has said that an overhaul of the state’s tax system to fix a potential $1 billion shortfall is unlikely. Beshear may decide as early as Friday if the General Assembly will have to return this summer to deal with a potential shortfall.

“We know we have to do something,” said Rep. Bill Farmer, R-Lexington, an author of one of the tax reform bills. “Is there motivation for real reform? Not without real leadership.”

The Kentucky Forward Coalition — made up of such groups as Kentuckians for The Commonwealth, Jobs with Justice, the Kentucky Education Association and the Kentucky Council of Churches — said in a conference call on Thursday that for too long Kentucky has depended on one-time band-aides to fix long-term budget problems.

Despite Beshear’s reluctance to tackle tax reform, organizers said they are hoping to use grass roots tactics to persuade legislative leaders and Beshear to make major changes in the way Kentucky raises revenue.

Sheila Schuster, director of the Advocacy Action Network, a network of mental health providers, said the coalition is mounting a “communication campaign around comprehensive tax reform.”

More cuts to services are not an option and Kentucky’s current tax system is unfair to its poorest residents, the coalition said.

“The public safety net for behavioral health services to address the needs of those with mental illness and substance abuse disorders has been chronically underfunded for years,” said Schuster, “It is frustrating because we know that treatment for behavioral disorders works. But treatment only works if it is available.”

Kelly Davis, of the Institute on Taxation and Economic Policy, said Kentucky’s tax system is regressive — meaning low and middle-income families pay a greater share of their income to taxes than do some of the state’s wealthiest citizens.

“In 2007, the poorest 20 percent of Kentucky residents(those with incomes less than $8,000) paid 7.8 percent of their incomes in state and local taxes,” Davis said. “The richest 1 percent — taxpayers with average income of $933,100 in 2007 — paid 5.8 percent of their income in Kentucky taxes.”

Rep. Jim Wayne, D-Louisville, and Farmer, R-Lexington, have both filed bills calling for comprehensive tax reform. Wayne’s bill calls for a restructing of the tax system so more of the share of the state’s tax burden is placed on the state’s wealthier residents. Farmer’s bill calls for the replacement of the state income tax with a sales tax. Both plans call for taxing more service-related industries.

Sen. Charlie Borders, R-Grayson, and chair of the Senate Appropriations and Revenue Committee, said Thursday that the bills will be heard for informational purposes only. Borders said he has not heard from legislative leaders or anyone in the executive branch that major tax reform will be considered any time soon.

“I don’t think there is anyone that would anticipate any type of tax reform at this time,” Border said. Nonetheless, legislative leaders have said they want to hear more about the proposals and what type of revenues they could generate.

– Beth Musgrave

Filed Under: State Budget • State Government • Steve Beshear