The biggest impediment to transforming Kentucky into a haven for job creation is our out-of-date tax system, which punishes productivity and discourages innovation and creativity.
Tax reform is long overdue in this state. We arrived at the current system after years of patchwork incentives, special-interest maneuvering and a lack of political courage in Frankfort to make the wholesale changes necessary for our state to advance.
To be sure, we have made some positive moves in recent years. Working with a Republican governor, Republicans under my leadership in the state Senate eliminated the corporate license tax, reduced personal and corporate income taxes and ensured continued decreases in property taxes.
Further, Senate Republicans stopped Gov. Steve Beshear from raising $300 million in job-killing taxes on small businesses in the 2010 budget. Despite these Republican-sponsored tax cuts, Kentucky remains far from having the sort of tax system that would make it truly competitive with other states. Veteran journalist Al Cross wrote in last weekend's Courier-Journal, "Debate on tax reform has gone pretty much nowhere in two decades." Cross correctly stated that the current tax code is "laden with exemptions defended by lobbying interests." These exemptions are an admission that our tax code is inadequate at its core.
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Here's my plan: Take the politics and special interests out of the tax code. I have proposed creating a panel tasked with writing a new tax code to be presented to the General Assembly for an up-or-down vote in the 2012 session.
This isn't another study group. It is an action-oriented panel that would write a new, pro-growth tax code and deliver it to the legislature. My plan is designed to give Kentucky an entirely new system, top-to-bottom.
The panel would consist of economists, experts on accounting and taxation and representatives from economic development sectors in our state. Their task is to write a tax code that makes Kentucky the most economically competitive state in the nation.
We have two choices: Continue to tread water, or create a brand new system that creates a pro-growth climate. I think our state is adrift and that treading water is simply not acceptable.
After the plan is written by the expert panel, it would go to the state House of Representatives for an up-or-down vote without amendment. This ensures the special interests and lobbyists don't hack up a plan that could put Kentucky on the path to prosperity. If the plan passed the House — where all matters of taxation must originate according to our state constitution — it would then go to the Senate for an up-or-down vote, again without amendment.
What would such a plan look like? I won't prejudge the work of a panel of experts. But I do have some strongly held beliefs about taxes.
They must be low. They must not punish productivity, creativity and hard work. They should not be regressive. And consumption-based taxes are more conducive to growth than productivity taxes. A new tax code should be flatter, fully transparent, user-friendly and fair to everyone participating in our economy.
Today, Frankfort is full of people who lack the appetite to tackle such a major issue. House Speaker Greg Stumbo says his chamber lacks political consensus to change the tax code. Beshear, as he does on most issues, lacks the courage to tackle such a tough problem.
Beshear needs to lead, follow or get out of the way on this critical issue.
To the naysayers and to the heads-in-the-sand crowd, I say that it is better to light one candle than to curse the darkness. We've spent decades cursing the darkness. It is time for leadership.
State Senate President David Williams is a Republican candidate for governor.