Herald-Leader Editorial

Tax task force must not disappoint; Ky. needs new revenue now

One task force must not disappoint

December 4, 2012 

When Kentucky governors want to call attention to and build support for items on their political agendas, they appoint task forces. When the General Assembly wants particular issues given more thorough study than they might receive in the interim committee process, it creates task forces. Thus, at any given time of any given year, it's likely multiple task forces will be hard at work solving (or at least trying to solve) the problems of the commonwealth.

Still, this has seemed more like the "Year of the Task Force" in Frankfort than most other years, perhaps because two of this year's panels have been dealing with some rather large elephants in the Capitol (reforms of the state tax code and the pension plans covering employees of state and local governments) and a third was assigned the task of bringing some sense and sensibility to the jumble of laws now governing the sale of alcoholic beverages.

Alas, the legislative task force on pension reform disappointed by failing to recommend a revenue source for the substantial amount of money it says the state should start pumping into the Kentucky Employees Retirement System and by failing to even broach the subject of transparency of individual pension benefits.

If anything, the task force on alcoholic beverages appointed by Gov. Steve Beshear disappointed even more by just tinkering around the edges while avoiding such substantive issues as the ban on alcohol sales on election days and the inequities in the way current law treats pharmacies and groceries.

Which leaves the task force looking at taxes. (Technically, it's known as the Governor's Blue Ribbon Commission on Tax Reform. But "a rose is a rose is a rose," as Gertrude Stein aptly noted.)

The tax panel has taken some big items off the table (extending the sales tax to food purchased for home consumption and replacing current corporate income taxes with a gross receipts tax, for instance). It has tentatively endorsed others (notably extending the sales tax to some as yet unspecified services, taxing more pension income, eliminating some income tax deductions, enacting an earned income tax credit and raising taxes on tobacco products).

But the panel still has a few decisions to make when it meets Thursday, presumably for the last time.

Chief among these is the one about the bottom line. The report consultants delivered to the task force in September makes it clear Kentucky's current tax structure doesn't generate enough revenue to provide basic services to the state's citizens. Anyone paying attention to the succession of budget cuts over the past decade knows the truth of the consultants' analysis. The state also desperately needs new revenue to make good on its pension obligations.

So, the bottom line is this: Real reform cannot just modernize the tax code, cannot just treat everyone fairly, cannot just make Kentucky competitive with other states, cannot just bring simplicity to what is now arcane, cannot just add the elasticity needed for future revenue growth. Most of all, real tax reform cannot be revenue neutral. To keep basic services to Kentuckians from eroding further, real tax reform must start growing the revenue base immediately. Anything less will disappoint.

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