Gov. Beshear announces $1.2 billion tax relief plan to help Kentuckians with inflation
Democratic Gov. Andy Beshear announced a tax relief package on Wednesday meant to help Kentuckians cope with inflation, including an immediate reduction in the property tax they pay on motor vehicles for the next two years.
At a news conference, Beshear signed an executive order to freeze the taxable value of motor vehicles at their 2020 levels, with refunds due to anyone who already has paid the tax this year. The price of cars has soared as high as 40 percent because of supply chain snags caused by the COVID-19 pandemic, driving up the value-based tax.
Beshear said he also will work with House Minority Whip Angie Hatton, D-Whitesburg, on a bill to cut the state sales tax from 6 percent to 5 percent for at least the next fiscal year, starting July 1. The sales tax is applied to many goods and services, although not groceries and prescription medicines.
$1.2 billion in savings, Republicans respond
Both changes combined would save Kentuckians an estimated $1.2 billion, including $873 million in motor vehicle taxes and $340 million in sales taxes, Beshear said.
“Our families are tired,” Beshear said. “Many are struggling to meet basic needs. Prices are simply too high.”
With his executive order on the motor vehicle tax, Beshear apparently is taking off the table a political hot potato that the Republican-dominated House and Senate hoped to resolve this session with their own competing bills.
However, Beshear’s proposed reduction in the sales tax is less certain. GOP lawmakers have spoken of crafting a broad package of tax changes this year with an emphasis on raising the sales tax while lowering or even eliminating the income tax, and they control the House and Senate, not the Democrats.
Republican legislators say they appreciate parts of Beshear’s package, but wish it would go further.
House Speaker David Osborne, R-Propsect, said that the proposal signals that Democrats have acknowledged that the state’s economy is not as “on fire” as the governor often says. The house speaker also said the governor could have acted sooner, but appreciates his new focus on the motor vehicle tax.
But with broader tax reform on his mind, Osborne said that he wants to see a much bigger tax cut for Kentuckians.
“Why should the people of Kentucky settle for a temporary one percent sales tax cut when we can adopt policies that let them keep more of their hard-earned money in the first place,” Osborne asked.
Sen. Donald Douglas, R-Nicholasville, who sponsored Senate Joint Resolution 99 in an attempt to address the issue said that the package is a “win” for Kentucky taxpayers.
However, Douglas pointed out that much of the language from his resolution was used in the executive order; he also called it a “flip-flop” from the governor’s earlier stance that he didn’t have the authority to issue such an order and like Osborne encouraged more “tax relief.”
At his news conference, Beshear cautioned “those in Frankfort who are using evasive terms like comprehensive tax reform” in order to comfort the wealthy and afflict working-class families.
“Raising the sales tax on everybody so that they can decrease the income and corporate income tax on the wealthiest Kentuckians and companies that are already having their best years in decades — those types of cuts — for out-of-state corporations — don’t benefit our economy,” Beshear said.
“People put them in their bank account instead of being directly related to spending,” he said. They will not stimulate our economy and they will not provide relief to people ion every single income bracket.”
Beshear said the two-year state budget plan he submitted to the legislature in January came with a massive surplus that should accommodate the revenue his tax relief package would forfeit. However, he said, some of the one-time spending in his budget would have to be financed rather than paid through the General Fund.
Prices up for meat, energy, cars
The Consumer Price Index rose 7.8 percent from January 2021 to January 2022 across the American South, which includes Kentucky, according to the U.S. Bureau of Labor Statistics.
The highest inflation in the South during this period came in prices for meats (12.6 percent), household energy (11.6 percent), new and used motor vehicles (23.7 percent) and gasoline (40.2 percent), according to the BLS. Prices rose relatively little for medical care (2.8 percent), school tuition and child care (1.6 percent) and recreation (3.2 percent).
The most recent data available suggests wages have not kept pace with price hikes.
The average weekly wage across all industries in Kentucky for the second quarter of 2021 was $996, according to federal data collected by the Kentucky Center for Statistics. That was was only 2.8 percent higher than the same quarter a year earlier, and it was actually a slight drop from the fourth quarter of 2020.
This story was originally published February 16, 2022 at 1:56 PM.
