Business rails against proposed tax changes

Business leaders meet with Senate panel

By Jack Brammer - jbrammer@herald-leader.com

FRANKFORT — Meeting with the Senate budget committee Tuesday, business officials railed against a House bill that generates revenue by suspending a popular tax break for businesses.

Senate budget chairman Bob Leeper, an independent from Paducah, indicated after the meeting that relief for worried businesses may be in the offing.

"We're listening to them, and they made their voice very loud and clear today on the impact on jobs for Kentuckians," Leeper said. "We have a great deal of concern about that. Our focus should be to keep Kentuckians working."

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Leeper said "it's difficult to say" if the committee will delete some of the tax changes in House Bill 530, which would raise more than $300 million to help balance the next two-year state budget. But he quickly added that several committee members have told him they could not vote for the bill without changes.

He gave no specifics on how the committee would make up any money that it might delete from the revenue bill, but said "sacrifices" would have to be made. He did not indicate when his panel will meet again to vote on the bill.

Business leaders are concerned about provisions in the bill that suspend tax credits and speed up the collection of taxes.

Businesses are mostly upset about the proposed suspension of a tax credit that lets businesses use losses to offset their tax bill over 20 years. Temporarily halting the provision is expected to raise $25.2 million this fiscal year and $162 million in the next two fiscal years.

Bryan Sunderland, director of public affairs for the Kentucky Chamber of Commerce, said the tax change would be "onerous" on businesses.

"This change is designed to target companies that have been losing money," he said. "This very fact calls into question their ability to absorb this increased tax burden, particularly when the credit market makes it difficult for many companies to secure business capital."

Sunderland also said the tax change would make it harder for Kentucky to attract more companies.

He said Virginia economic development officials were in Louisville last week trying to lure Kentucky employers and jobs when the House passed the revenue bill.

"They were here trying to convince employers to move out of the state — arguing they can offer a better business and tax climate," Sunderland said. "We ask you not to send the wrong signal to current and future Kentucky employers."

Other provisions of the bill would:

■ Accelerate the payment of withholding taxes by certain employers to raise about $9 million for the state treasury.

■ Speed up payments from taxpayers who owe $30,000 or more a month to generate $90 million in fiscal year 2012.

■ Put a $5 million limit on tax credits for the film industry in the first year of the budget and a $7.5 million limit in the second year to save $15.9 million over the two years. The film industry tax credit now has no cap.

■ Extend to June 30, 2011, a tax credit for those who trade in a vehicle when they purchase a new one. If a $25 million cap is reached before that date, the trade-in allowance would cease.