Herald-Leader Editorial

Ky. budget nothing to celebrate as lawmakers leave tax reform undone

April 6, 2014 

A perverse form of grade inflation has taken over public expectations for the Kentucky General Assembly.

In the aftermath of an era of stand-your-ground politics that had sessions adjourning without performing the most basic duty — agreeing on a spending plan — legislators rain down accolades on themselves for merely passing a budget, even a very bad one.

And, make no mistake, the budget the General Assembly has approved does not deserve a passing grade.

Kentucky desperately needs tax reform but didn't get even a hint of it. Instead, legislators took the much easier, and more ruinous, path of giving away tax breaks to a few favored businesses based on the theory, supported by nothing, that someday they'll get richer and perhaps the state will benefit, too.

So, while other states have pulled out of the recession and begun to experience surpluses, Kentucky continues to cut universities, community colleges, child care, infrastructure — robbing further from its future to balance the books in the present.

This cannot surprise anyone. The economic consultants for the most recent task force on tax reform offered a stark prediction in the report they delivered in the fall of 2012: "Without fundamental reforms Kentucky could face a $1 billion shortfall by 2020, and could find itself at a competitive disadvantage to neighboring states for business growth, retention, and recruitment."

How could they predict this? Because it's what's been happening.

Going back to 1970, the economists looked at how much Kentuckians earned and what portion of those earnings were paid to the state as taxes. That peaked in 1995 at right about 8.5 percent, sinking steadily and reaching just below 7 percent in 2010.

"Meanwhile," the economists noted, "the demand for public services, such as education, health care, and infrastructure maintenance and development, continues, and can be expected to grow at about the same rate as the economy."

Some of the tax cuts approved with little discussion last week were included in Beshear's tax reform package, presumably as a sweetener to help pass the needed reforms. Legislators had no taste for the hard, politically risky work of tax reform and so chose to take the easy route by handing out more tax breaks.

They don't even deserve an incomplete.

There is no hope for tax reform this year but some important legislative efforts are still hanging that can be taken up and passed into law when the General Assembly returns for two days on April 14:

■ Felon voting rights. The House passed HB 70 that would bring Kentucky into line with almost every other state through automatic restoration of voting rights for most felons after they have completed their punishment. The Senate dismantled the effort. The House version should be revived and passed.

■ Combatting heroin abuse. SB 5 includes stronger penalties for distributing heroin and makes a drug more available that reverses the life-threatening effects of an overdose. The bill stalled with changes that took out homicide prosecutions for dealers when a client dies of an overdose, and allowed users to exchange dirty needles for clean ones without risking prosecution. Needle exchanges remove dirty, dangerous needles from our streets and sidewalks and provide a chance to reach out to drug users with treatment options. Homicide prosecutions would be rare and might not survive a constitutional challenge. Accept both changes and pass this much-needed legislation.

■ Lexington hotel tax. The Senate has not acted on a bill to allow Lexington's city council to consider raising the hotel tax here by 2.5 percent to 8.5 percent. A critical element of the Rupp Arena funding plan, even with the increase Lexington's tax would be below that of most surrounding cities. Lexington itself should be allowed to debate and decide this issue.

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