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Monday, April 2, 2018

Senate Currently Debating Major Tax Reform That Would Raise Revenues, Fund Pensions

A 31-page document detailing the compromises for budget bill HB 200 was distributed by the Kentucky Senate Majority Caucus today.

The free conference committee was tasked with negotiating the budget items from HB 200 after the House and Senate's versions of the bill differed.

The passage of the budget bill will now be dependent on tax increases that are now being deliberated in the Senate chambers. House Bill 366 will generate an estimate $230 million in increased taxes.

The surprise tax reform bill is the biggest effort to be taken up in the Kentucky legislature in year.

The bill lowers individual income tax to flat five percent and corporate income tax to flat five percent and sales tax will be expanded to selected services such as landscaping, janitorial services, pet care, physical services, laundry, linen supply, golf and fitness clubs and tanning salons. Additionally an increase of $.50 per pack on cigarettes will help fund the new budget items.

Sen. Damon Thayer (R-Georgetown) said the overwhelming message he has heard during this General Assembly was to find funding in lieu of cutting benefits.

"I'm happy to see the income tax go down and revenue being raised on services that are being purchased. This let's people choose how they are being tax based on their buying habits," he said.

"I'm surprised to hear the cheers for the speeches of those in the minority party because they are the ones who asked us to find funding first. That's the message we've been hearing." 

Thayer noted that the $230 million in tax increases helps to fully fund the SEEK formula and fully fund teacher pensions.

"This is the Kentucky version of the Trump tax plan," said Sen. Reginald Thomas (D-Lexington). "How's that working out for Kentucky?"

Morgan McGarvey (D-Jefferson) said that he could not support the bill because of the way it was introduced. "This bill was created and drafted behind closed doors. We haven't had the opportunity to discuss this at committee or in this body and that's just wrong," he said. "The majority party is in control and just because they are able to do this, doesn't mean they should."

McGarvey noted previously when Democrats held a supermajority, they also passed legislation without Republican input.

"It was wrong then and it's wrong now," he said.

Senate President Robert Stivers (R-Manchester) said that when he was in the minority party, he detailed an exchange with the Governor then, who he did not name. He said that if Stivers didn't vote with him on an issue, he was going to strip everything from the budget bill that they asked for.

"He said that if you don't vote with me, you'll be left with crumbs. I told him that we've had nothing for years,  so crumbs will look like the whole cake," he said.

"No one wants to raise revenue, but to be able to fund those components that individuals this session have asked for will positively raises revenue so that we can go forward. It's a structurally balanced budget, the first I've seen in my 22 years. Is it all the steps that need to be done? No sir. But it means that we control our revenue and costs so we can raise teachers pay into the future."

The vote on the revenue bill, HB 366, will be taken today. It is expected to be close.

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