Op-Ed

Keeling: Kentucky exempts more taxes than it takes in

This and that, the Hooray for Recess Edition Sequel:

Let's talk tax reform. (Hey, I'm a sucker for lost causes.)

Senate President David Williams wants a panel of experts from the private sector to relieve lawmakers of their lawmaking duties by drafting a new tax code and submitting it to the 2012 General Assembly to be swallowed whole, or not at all.

House Speaker Greg Stumbo says lawmakers need to do the lawmaking, but hasn't shown any inclination for leaping into the tax reform abyss in the near future.

Gov. Steve Beshear won't go there until the economy recovers, if ever.

All of which leaves a couple of lonely bipartisan voices crying in the Capitol wilderness. Republican Rep. Bill Farmer and Democratic Rep. Jim Wayne annually drop their competing visions of tax reform in the House hopper. And both visions annually generate a collective yawn from a vast majority of the other 136 legislators.

But a report issued last week reminds us why Kentucky desperately needs serious tax reform. The report from the Kentucky Center for Economic Policy, an offshoot of the Mountain Association for Community Economic Development, dealt with "tax expenditures."

If you think this phrase refers to the spending of tax dollars, go to the back of the class. Tax expenditures is a fancy term for the revenue the state loses by not collecting certain taxes on certain classes of businesses, individuals and transactions. Think tax exemptions, tax incentives, tax credits and other tax breaks.

According to the report, which relied on information the state provides regularly, tax expenditures for fiscal year 2010 totaled $8.4 billion — more than the revenue the state collected for the year.

This really should surprise no one. The Herald-Leader reported a year ago that just one category of these tax expenditures, sales tax exemptions, would cost the state an estimated $2.4 billion in 2010, compared to an estimated $3 billion in collections.

"The legislature commonly adds a few new tax expenditures each session," the KCEP report noted, citing the addition or expansion of five tax breaks during last June's budget special session.

And the beat goes on. At least 13 bills proposing new or expanded tax breaks were introduced during the opening four days of this year's 30-day General Assembly.

Tax breaks for the select few simply increase the tax burden on the many. Besides, it's bad policy to require that everything on the spending side of the state budget must be justified every two years while never looking at the revenue side to determine the success or failure of the 287 existing tax expenditures.

"If we're asking our social service agencies and education to further trim their spending, then at some point, we need to be able to say whether all this money we're spending on tax expenditures is doing what it's supposed to do," House Appropriations and Revenue Committee Chairman Rick Rand told the Herald-Leader a year ago. "Is it really creating jobs? Is it really developing the economy? Is it the best way to achieve the results we want?"

Amen.

Interesting little race shaping up in the Democratic primary for secretary of state. Multiple rifts resurfacing. Prominent D's lining up against their party's incumbent governor. Typical Democratic free-for-all.

But it might have been wiser, for a couple of reasons, if Lexington Mayor Jim Gray had stayed out of this fray.

First, even though he's a Democrat, the position he holds is nonpartisan. Second, governors have a lot more power — to be nice to a city or not so nice to a city — than secretaries of state do.

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