Kentuckians to Pay $690 Million More in Taxes Each Year

UPDATE 12/7/2012

 The Kentucky Blue Ribbon Commission on Tax Reform met for the last time  yesterday, and will now prepare and submit final recommendations to Governor Beshear by December 15th.  The proposed taxes are expected to raise almost $700 million annually for the commonwealth.

According to mycn2.com, some of the final recommendations included:

- Taxing retirees’ public pensions starting after $30,000 instead of the $15,000 level, proposed earlier by the commission. The state currently taxes retiree pensions just above $41,000 dollars.

- $290 million is anticipated from "taxes on cigarettes, closing some corporate loopholes and applying the state sales tax to certain services and utility payments."

MyCN2.com reported that "Kentucky currently taxes income on six brackets at rates ranging from 2 to 6 percent. Everyone in the state earning more than $8,000 is taxed at a 5.8 percent flat rate and those making more than $75,000 rare taxed at a 6 percent rate."

The commission also voted for an Earned Income Tax Credit which would provide the lowest income residents with extra cash, according to MyCN2.com.  

Read the full report at: http://mycn2.com/politics/opening-bid-from-tax-commission-690-million-will-it-be-enough-or-too-much-for-lawmakers

Kentucky Blue Ribbon Commission - Items Still Under Consideration

MEMORANDUM

To:	Blue Ribbon Commission on Tax Reform
From:	Staff
Re:	Items Still Under Consideration
Date:	November 18, 2012

Dear Commission, below see the tax reform proposals that are still under consideration:

Individual Income Taxes

Proposal # 1: Add additional tax rates for higher income individuals on the income tax

Proposal # 2: Change the reference to the Federal Code from December 31, 2006 to December 31, 2012

Proposal # 4: Eliminate or reduce the income tax

Proposal # 6: Enact a state Earned Income Tax Credit

Proposal # 7: Implement a tax deduction for 529 college savings plan contributions

Proposal # 8: Limit itemized deductions

Proposal # 9: Make taxable income equal to the federal Adjusted Gross Income (AGI) less a significant standard deduction and tax credit for low income households

Proposal # 10: Tax Retirement income

Proposal # 11: Remove the spousal division on income and deductions

Corporate Taxes

Proposal # 14: Create an R&D Tax Credit

Proposal # 28: Exempt business-to-business transactions, including the purchases of business inputs used for the manufacture of goods

Sales and Excise Taxes

Proposal # 29: Apply transient room taxes to entire hotel accommodation price

Proposal # 30: Apply sales tax to pre-written computer software

Proposal # 32: Charge sales tax only on materials used to build a manufactured home, or 50 percent of the retail cost

Proposal # 34: Exempt mail charges for direct mail from sales tax

Proposal # 35: Extend sales tax to the auction price of a thoroughbred horse

Proposal # 36: Remove the sales tax from livestock antibiotics

Proposal # 38: Impose a gross receipts tax of between 1 and 3 percent on both residential and business utilities

Proposal # 39: Impose a gross receipts tax of up to 3 percent for residential utilities

Proposal # 41: 1) Increase collection of out-of-state and Internet sales; 2) Support federal legislation allowing states to require remote firms to collect sales tax

Proposal # 42: Increase the tax rate on cigarettes and other tobacco products

Proposal # 43: Raise the sales tax

Proposal # 46: Review the sales and use tax on equine products

Property Taxes

Proposal # 47: Allow school districts to maintain the current property tax assessment rate even when the new assessment surpasses the four percent cap

Proposal # 48: Create a tax credit for the bourbon industry to offset the property tax on stored barrels of bourbon, without reducing local property taxes to school districts

Proposal # 49: Eliminate personal property taxation

Proposal # 50: Exempt Inventory from Property Tax

Proposal # 51: Freeze the state property tax rate at 12 cents per $100 of value

Proposal # 52: Increase funding for PVA offices, or create a dedicated funding stream for PVA offices

Proposal # 55: Identification of public service companies for taxation

Proposal # 57: Amend the Constitution to eliminate the homestead exemption for those over 65 while putting in place a statutory means-tested property tax circuit breaker for those over 65

Proposal # 58: Remove the HB44 recall provisions for local and school real property taxes

Severance Taxes

Proposal # 61: Clarify the definition of “gross value” under severance tax

Other Taxes / Issues

Proposal # 62: Eliminate Tax Increment Financing programs (TIFs)

Proposal # 63: Establish a Kentucky estate tax with modest exemption limits

Proposal # 64: Impose the Pari-mutuel tax on advance deposit wagers made by Kentucky residents on live races conducted at Kentucky race tracks

Proposal # 65: Sunset or provide regular review of tax incentives

Proposal # 66: Broaden the hospital provider tax to include doctors

Road Fund Issues

Proposal # 67: Implement a trade-in credit for new car purchases

Proposal # 70: Modify the index in the gas tax rate to tie it to the inflation rate of transportation infrastructure construction costs

Local Taxation Issues

Proposal # 71: Allow all classes of local governments to have a local option food and beverage tax

Proposal # 72: Amend the Constitution to allow a local general sales tax

Proposal # 73: Switch to a statewide restaurant tax of one percent instead of localities having different restaurant taxes

Proposal # 74: Allow single sales factor apportionment as a defined option to the city/county business tax calculation

Simplicity, Compliance and Tax Administration

Proposal # 76: Allow non-renewal of professional licenses, driver’s licenses and vehicle registration if taxpayers are delinquent on state taxes to improve collections

Proposal # 80: Create a uniform occupational tax statewide form

Proposal # 86: Installment payment agreement clarification

Proposal # 87: Make LLC members personally responsible for all taxes & make corporate officers personally liable for motor vehicle usage tax

Proposal # 89: Review the disparity in the tax code and law between documented and undocumented boats

Proposal # 90: Sales tax successor liability to enhance the Department of Revenue’s collection efforts

Proposal # 93: Return to a balanced interest rate on taxes owed to and by the state

Proposal #96: Eliminate the estate tax

Kentucky Pays $3 Million a Year for State Employee

These are tough times for many Kentuckians across the state. The unemployment rate is hovering around 8.4 percent statewide, and in some counties, unemployment exceeds 13 percent. But, according to the government, the recession didn't hit Kentucky as hard as some other states. We were more fortunate than some, and less fortunate than others.

Either way, the downturn in the economy, combined with much slower than projected economic growth, has impacted state revenues.  Therefore, many state governments, including Kentucky, are now calling on their citizens to do their fair share, which normally means, pay more taxes.

To determine Kentucky tax payers' fair share, and who will pay it, Governor Beshear appointed a group, headed by Lieutenant Governor Abramson. The group, called the Kentucky Blue Ribbon Tax Reform Commission, started work in the spring of 2012, and proposed a number of ways to increase revenues for the state treasury, but has not offered a single proposal to reduce government spending. And excessive government spending is, by any mathematical calculation, the root of Kentucky's fiscal problems. 

For example, a search of the Louisville Courier-Journal's Government Salaries Database reveals 32 state employees who make between five-hundred thousand and three million dollars each year, for a combined total of $24,083,703 dollars. The two highest paid state employees are the University of Louisville's basketball coach, Rick Pitino, who receives 3 million dollars a year, and the Cardinals' football coach, Charlie Strong, who earns 2.3 million dollars a year.

(Top 15 recipients of Kentucky Tax dollars)

The combined 5.3 million dollars for Pitino and Strong are 100 percent funded by state tax payer dollars. In contrast, University of Kentucky Coach, John Calipari, receives 400 thousand dollars annually from Kentucky tax payers. The remainder of his multimillion dollar contract is funded by sponsors like Nike, and through other private resources. A similar structuring of the Pitino and Strong contracts would save Kentucky tax payers 4.5 million dollars each year. 

This is just one small example of how the state government could save millions of tax payer dollars. Hopefully, as the Governor, the Blue Ribbon Commission, and the state legislature move forward on taxes, they will ensure taxes are not just equitable, but more importantly, essential to the welfare of the Commonwealth.