Tax reform panel rejects placing tax on food

Task force looks to simplify system

October 25, 2012 

FRANKFORT — A panel appointed by the governor to study tax reform in Kentucky has rejected a proposal to tax food at grocery stores.

The idea was unpopular with the 17-member Blue Ribbon Commission of Tax Reform, which dismissed it as a burden on the poor. Consultants said a 6 percent tax could generate about $500 million each year.

"It's off the board," said Lt. Gov. Jerry Abramson, who serves as chairman of the panel.

The Courier-Journal reported that the commission met for nearly four hours Tuesday to shorten a list of 96 recommendations. Members also voted to reject several other proposals, including ones that would raise the coal severance tax rate, remove the property tax on airplanes and give a tax credit to people who home-school.

"I think we've made progress, we've taken many items off the board," Abramson said. "... And I think we're beginning to see recommendations on the income tax and corporate taxes come into view."

However, he said major decisions have yet to be made as the panel comes close to a Nov. 15 deadline to produce a final report. It has only one meeting — on Nov. 8 — before the deadline. Abramson said he may ask to have the deadline extended.

Beshear tasked the panel in February with coming up with a simpler tax code that would generate enough revenue to meet state needs.

After eliminating about 12 proposals on Tuesday, the commission discussed the individual income tax.

John Williams, chairman of Computer Services Inc. in Paducah, said he thought an income tax approach similar to Indiana's should be considered.

Kentucky has different tax rates for different income levels and allows itemized deductions; Indiana has a flat rate and doesn't allow itemized deductions.

"I'm in favor of us going to the postcard" size for the Kentucky tax return, he said.

Kentucky Center for Economic Policy Director Jason Bailey said he supports eliminating itemization but warned against lowering the rate of the income tax, which is the state's largest source of revenue.

"We need more money ... and I think we need to look at the income tax and a combination of the things around the income tax that potentially do raise some revenue," Bailey said.

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