Advocacy groups call for action on tax reform

By RONNIE ELLIS
CNHI News Service

FRANKFORT May 29, 2009 11:44 am

— A coalition of advocacy groups for low-income people Thursday challenged legislative leaders and Gov. Steve Beshear to take up comprehensive tax reform in the all but certain special session next month.
“We call upon the governor to include comprehensive tax reform on the agenda of any special session and for legislators to live up to their commitment to address tax reform,” said K.A. Owens, chairman of the Kentuckians for the Commonwealth.
Beshear anticipates a revenue shortfall of up to $1 billion dollars in fiscal year 2010, and the Consensus Forecasting Group, outside economists who advise the governor and legislature on revenue projections, is expected Friday to come up with a similar estimate. That would represent about 11 percent of the state’s general fund and require Beshear to call lawmakers into session to revise the budget.
Two major tax reform bills were filed in the 2008 session but neither made it to the floor of either chamber. One, sponsored by Rep. Bill Farmer, R-Lexington, would eliminate income taxes and extend the sales tax to all services except food, medicine and a few professional services. The other, sponsored by Rep. Jim Wayne, D-Louisville, would lower taxes on lower income groups while shifting more burden to the wealthy.
When the General Assembly voted this spring to increase alcohol and tobacco taxes to cover a $456 million shortfall in fiscal year 2009, House Speaker Greg Stumbo, D-Prestonsburg, and Beshear pledged to consider tax reform before the next regular session. But both have said since then tax reform should be studied in-depth before any action is taken.
“Tax reform does mean increasing taxes for those who are not paying their fair share,” Wayne said. “But it also means tax cuts for others who are paying more than their fair share.”
Kelly Davis, of the Washington, D.C.-based Institute on Taxation and Economic Policy, said poor Kentuckians carry too much of the load in Kentucky while the wealthiest tax payers in the state don’t carry enough of it.
“In 2007, the poorest 20 percent of Kentucky residents – those who make less than $6,000 – paid 7.8 percent of their incomes in state and local taxes,” said Davis, who participated in the teleconference. “The richest 1 percent with average incomes of $933,100 in 2007 paid 5.8 percent of their income in Kentucky taxes. Changing the state tax structure in a progressive way would ensure that Kentucky taxes are based on the ability of Kentuckians to pay those taxes.”
But the political prospects for increasing any taxes don’t appear good. Beshear and Stumbo have said in recent weeks it is unwise to raise taxes during an economic recession.
Wayne and Farmer are scheduled to explain their bills before an interim joint budget committee on June 4, but House budget chairman Rick Rand, D-Bedford, and Senate budget chairman Charlie Borders, R-Grayson, both said they don’t expect either bill to be taken up in a special session.
Senate President David Williams, R-Burkesville, promised an “Armageddon” for those who seek to raise taxes, saying the legislature has given “this governor as much money as he’s going to get” and the governor must tighten the state budget belt like families are doing.
But Sheila Schuster, director of the Advocacy Action Network, an advocacy group for the disabled, sick and handicapped, said, “When legislators say tighten your belt, we say there’s not belt. “When service delivery agencies are spending as much time looking for the next dollar which will keep their doors open as they are in providing direct services, the system demands to be fixed.”
Asked why lawmakers are reluctant to address the concerns of the coalition, Schuster said, “It’s pretty obvious.” She said contributions to politicians’ campaigns come from upper income groups.
“We have a system that protects the big income folks and unfairly burdens the low income folks,” Schuster said. “It’s not just the economics of the system but the basic unfairness of that system.”
Ronnie Ellis writes for CNHI News Service and is based in Frankfort. Reach him at rellis@cnhi.com.