UPDATED: Kentucky Senate Advances Last-Minute Overhaul Of Tax Code
Updated: 4:38 p.m.: The bill narrowly passed out of the state Senate, with a vote of 20-18. All Senate Democrats voted against the measure and were joined by 11 Republicans, some of whom expressed concerns about raising taxes.
Shortly after the tax bill was unveiled on Monday morning, Americans for Tax Reform president Grover Norquist urged Kentucky lawmakers to not pass the pledge in a letter.
Norquist said lawmakers were “wrongly” trying to raise revenue by raising taxes.
“The purpose of tax reform is not to serve as a Trojan Horse for a net tax increase to raise revenue for state government,” Norquist wrote in the letter. “Rather, the goal of tax reform should be to make the state more attractive to investment, more conducive to economic growth, and allow households to keep more of their hard-earned income.”
There are 25 Republican members of the state House and 10 members of the Senate legislators have signed a “no tax” pledge put forth by Norquist.
Jason Bailey, executive director of the progressive Kentucky Center for Economic Policy, said the tax changes disproportionately affects people who make less money.
“The bill is a tax shift from the wealthy and corporations — who will get a tax cut — over to low- and middle-income Kentuckians,” Bailey said in an emailed statement.
“It will also have a very concerning impact on revenue over the long-term because it moves us from more-productive income taxes to slower-growing sales and cigarette taxes. That will make our budget problems worsen over time.”
Update: 4:28 p.m.: Gov. Matt Bevinhas tweeted out his disapproval of the budget and tax bills that are quickly making their way through the Kentucky General Assembly on one of the final days of the legislative session.
Bevin didn’t directly comment on any provisions within the budget or tax bills, but said he was concerned that the proposals might not meet “basic standards of fiscal responsibility.”
“It is our obligation to ensure that any budget and tax changes put Kentucky on a stronger financial foundation,” Bevin said in the statement. “We have ample time left in this legislative session to thoughtfully do exactly that.”
Lawmakers are trying to pass the bills by end of today in order to preserve their right to override any vetoes Bevin makes to the bills.
If the bill passes out of the legislature, Bevin would have 10 days to consider whether to sign the proposal or veto all or part of it.
Lawmakers are already planning to return on Saturday, April 14 to override any potential vetoes.
Republican leaders of the Kentucky legislature have unveiled a surprise overhaul of the state’s tax code on one of the last days of this year’s legislative session.
The proposal, which includes both tax increases and cuts, is moving quickly towards final passage in the legislature and would be the first major change to the state’s tax code in nearly two decades.
The bill establishes a flat income tax rate of 5 percent — currently Kentuckians are taxed at rates ranging from 2 percent to 6 percent, depending on income.
It expands the state’s 6 percent sales tax to 17 services like car repairs, landscaping, pet grooming, dry cleaning and country club memberships. It would also raise the per-pack tax on cigarettes by 50 cents to $1.10.
The plan also lowers the state tax exemption for pension income from the first $41,110 earned to the first. $31,110.
The plan would net about $239 million in new revenue for the 2019 fiscal year, which begins on July 1, and $248 million in the 2020 fiscal year according to an analysis released by Republicans.
Thousands of teachers packed the state Capitol on Monday to watch the budget proceedings after lawmakers rushed through a surprise overhaul of the public worker pension system last week.
All 120 school districts are closed Monday — most of the state’s schools are off for spring break, but remaining districts have shut down to accommodate teachers attending the rally.
Lawmakers are set to vote on a two-year budget that cuts most of state government by 6.25 percent in order to set aside $3.3 billion for the state’s ailing pension systems — about 15 percent of all state spending for the next two years.
But the increase in revenue helped budget writers avoid or lessen cuts in some areas.
The budget bill funds public schools at $4,000 per pupil each year — more than the $3,984 proposed by Gov. Matt Bevin but less than the $4,055 that the House wanted.
It also restores state funding for public school transportation and health insurance that was reduced by Bevin in his budget proposal.
The budget proposal preserves cuts to higher education, but Republican budget writers said some of that money would be restored through performance funding.
The bill also includes language that would allow universities to fire faculty, including tenured faculty, “when the reduction is a result of the board discontinuing or modifying an academic program.”
This post has been updated.
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