One-third of the session is over; tax reform will be the defining issue of KYGA22
One-third of the 2022 session is over. Redistricting is done (unless a lawsuit filed against the state House and U.S. congressional redistricting maps is successful) and the House has passed its version of the budget.
Tax reform is emerging as the defining issue for the remainder of the legislature’s time in Frankfort.
Both House Speaker David Osborne and Senate President Robert Stivers signaled the issue’s priority in December. House Appropriations & Revenue Chairman Jason Petrie has talked about it in recent weeks.
The debate is playing out on the state’s opinion pages as well:
The Bluegrass Institute’s Jim Waters points to Indiana and North Carolina as instructive examples of tax reform done right. Waters argues the General Assembly is in a position “to provide needed relief to taxpayers, who carry heavier tax burdens than their counterparts in other states.”
Ashli Watts, President of the Kentucky Chamber of Commerce, praises the 2018 tax changes (without acknowledging they were a net tax increase) and argues the Bluegrass State must take “bolder steps to truly reform Kentucky’s tax code and position the commonwealth as a top-tier state for economic growth.”
Jason Bailey from the Kentucky Center for Economic Policy previews the forthcoming liberal-progressive arguments against a pro-growth proposal, suggesting higher taxes are “a path to prosperity” while also arguing any reform that lowers individual income tax rates will almost certainly deny state government the revenues needed to support “early childhood education, infrastructure, clean air and water and more.”
Republicans in Frankfort are said to be concerned with what happened in Kansas a decade ago — or more accurately what the media narrative became of the Kansas tax reform. The reality is more complex and could offer important lessons for this year’s effort in Kentucky. (Cato, Reason, ALEC)
Maintaining a stable revenue base is an important policy goal. Republican leaders are signaling that a significant portion of current unappropriated dollars will be available to smooth out any initial revenue fluctuations post-reform.
Jim Waters was right when he wrote, “using one-time dollars to plug temporary short-term shortfalls resulting from lowering income tax rates seems like one of the best investments the commonwealth could make.”
Getting to zero-percent on the individual income tax isn’t going to happen anytime soon (if ever). The near-obsession with that goal reflects an overly-simplistic view of what has made states like Tennessee, Florida and Texas realize their impressive growth.
Indiana’s approach that steadily and predictably lowered their rate is the best path forward for the General Assembly. Without question, the Hoosier State’s economic development climate has benefited from the improvements in their tax code.
By all means Frankfort, move ahead with an aggressive, pro-growth tax plan. Then move onto the variety of other factors that place Kentucky among the lowest ranked states in the country for economic freedom.