Politics & Government

Here’s one way Kentucky could fund its pension promises to teachers and state workers

Can Bevin turn the ‘sacred cows’ of Kentucky’s tax code into hamburger?

Each year, Kentucky gives away more tax revenue through loopholes and incentive programs than it actually collects. Gov. Matt Bevin promised earlier this year to turn some of these "sacred cows" of Kentucky's tax code into hamburger, but that's ea
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Each year, Kentucky gives away more tax revenue through loopholes and incentive programs than it actually collects. Gov. Matt Bevin promised earlier this year to turn some of these "sacred cows" of Kentucky's tax code into hamburger, but that's ea

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Kentucky’s tax problem

Kentucky’s legislature needs billions of dollars to pay down the state’s unfunded pension liabilities. As it happens, Kentucky essentially gives away billions of dollars every year through what are called “tax expenditures.” Will Kentucky lawmakers close some of these loopholes?

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Kentucky’s legislature needs billions of dollars to pay down the state’s unfunded pension liabilities. As it happens, Kentucky essentially gives away billions of dollars every year through what are called “tax expenditures.”

These are the many decades of accumulated tax breaks, tax credits and incentive payments involving tax money. In this fiscal year, the state budget office predicts that those expenditures will cost Kentucky $13 billion. That is $1 billion more than the state is likely to collect in revenue.

In an effort to start a public conversation about tax reform — because everyone seems to agree that such a talk is overdue — the Herald-Leader has examined a few tax expenditures that keep taking their slices from Kentucky’s stressed budgets without ever being asked to justify themselves.

One of them reimburses production companies for up to 35 percent of the cost of making movies and television shows inside the state. Another offsets many of the expenses of real-estate development by successful businessmen. Another shrinks state property taxes on luxury houseboats to almost nothing. Another exempts most services from the sales tax, even those aimed at the upscale crowd, such as landscaping and country club memberships. And another takes the sales tax off gravestones.

These are just five examples out of hundreds, ranging from the small ($626,000 a year for houseboat taxes) to the enormous ($2.5 billion a year for taxing services).

Whether Gov. Matt Bevin and the legislature will scrutinize these tax expenditures anytime soon remains to be seen.

In the words of state Rep. Rick Rand, D-Bedford, a former House budget chairman, “We never do enough to determine if we’re getting as much from them as we’re giving away.”

Part 1: Kentucky awards $5 million a month to low-budget films. What do we get in return?

Kentucky has promised more than $90 million in incentives to companies making movies, television shows, documentaries and commercials inside the state.

Part 2: How developers of Lexington’s flashiest mall got a tax break meant for blighted areas

With hundreds of millions of dollars going to developers through tax increment financing, or TIFs, for projects in both blighted, and prosperous areas, the state of Kentucky has yet to study the return on investment that these dollars yield.

Part 3: Luxury houseboat owners get a big tax break in Kentucky. Fishermen pay 30 times more.

Kentucky's property tax rate on small fishing and ski boats in Kentucky is 30 times higher than on many houseboats.

Part 4: This tax loophole saves Kentuckians billions. Here’s why that might need to end.

Part 5: Your loved one just died. There’s a tax on the coffin but not the gravestone. Why?

Blake Shouse, manager of Shelbyville Monument Co. in Shelbyville, Ky., makes his case for why the state should not put a sales tax on tombstones and grave markers. The tax exemption on gravestones costs Kentucky about $8.5 million each year.











How to get involved

You can let lawmakers know where you stand on the issue by emailing your representatives here or leaving them a voice message at 800-372-7181.

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