Editorials

Ky. needs a break from tax breaks

Don Parkinson, secretary of the Tourism, Arts and Heritage Cabinet that oversees the film tax incentive program said his agency hasn’t calculated the economic benefit of the giveaways. “Right now I can’t give you an economic impact study. We just don’t have that,” he said.
Don Parkinson, secretary of the Tourism, Arts and Heritage Cabinet that oversees the film tax incentive program said his agency hasn’t calculated the economic benefit of the giveaways. “Right now I can’t give you an economic impact study. We just don’t have that,” he said. John Cheves

If wishes were horses, the proverb says, beggars would ride.

Hoping something will happen doesn’t mean it will.

Yet that’s exactly what Kentucky legislators and governors have done, over and over and over, as they’ve passed tax giveaways in the fantastic hope that subsidized businesses will enliven Kentucky’s economy and the state’s coffers will magically overflow.

We’re still wishing, we’re still beggars and we’re still walking.

The first installments of a Herald-Leader examination of Kentucky’s vast web of tax breaks — we forgive $13 billion each year, more than we collect — offer grim insight into how privileged companies get huge tax breaks while small businesses and individual taxpayers continue footing the bill for diminishing state services.

This is particularly concerning as Gov. Matt Bevin prepares to call a special session where his Republican majorities are almost certain to make wholesale changes to public retirement systems that will leave most state workers and many retirees poorer.

Tax reform is next on the agenda when the General Assembly convenes in regular session in January.

But don’t expect legislators to tighten loopholes to ease our fiscal woes. As these stories illustrate, legislators fall prey to the blandishments of well-paid lobbyists who promise economic growth if only the industry they’re shilling for gets a chunk of its taxes kicked back. Otherwise, they warn, without this encouragement businesses will go to other states with friendlier tax codes.

“We convinced them it was a good idea,” Lexington lawyer, lobbyist and former legislator Bill Lear told reporter Linda Blackford about the sleight of hand that resulted in a $24 million windfall for the developer of The Summit. Tax increment financing (TIF) laws aimed at reviving blighted urban areas were rewritten to include farmland in South Lexington that became an upscale mall.

As with Kentucky’s film incentives — $90 million for 150 productions since 2009 — there is no requirement to report back on just what the state got for its investment.

“Right now I can’t give you an economic impact study. We just don’t have that,” Don Parkinson, secretary of the Tourism, Arts and Heritage Cabinet that oversees the film program, told reporter John Cheves.

The same is true for the TIF program that has given developers $111 million with another $2.9 billion pledged.

“There’s no way to know what the net value is to Kentucky,” Pam Thomas, longtime staffer at the Legislative Research Commission, said about TIFs. She wrote a white paper on TIFs for the Kentucky Center for Economic Policy, where she now works. Since the original TIF legislation passed, Thomas wrote, it “has been expanded, its safeguards have been reduced and its original purposes have been forgotten.”

Like the TIF program, tax giveaways just keep growing. The $12.2 billion in exemptions in 2016 is expected to grow to $13.1 billion this budget year. As for revenue, $10.3 million flowed into the general fund in 2016, with $10.7 billion expected in the current year.

That math will only change when voters pressure legislators to create a fair tax code that reliably funds government services, including pensions.

Wishing won’t won’t change those numbers.

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