Kentucky Senate President looks to Georgia for tax plan

FRANKFORT, Ky. — Kentucky Senate President David Williams says he looked to Georgia — where an independent group of experts has recommended expanding that state’s sales tax to include groceries while cutting corporate and individual income taxes — as a model for his own approach to comprehensive tax reform.

Williams, a Republican from Burkesville who is running for governor, wants to move Kentucky’s tax system from one that taxes production toward one that taxes consumption, and he said what’s happening in Georgia “proves the way I want to approach it is the only way it will work.”

Kentucky Senate President David Williams gestures during an interview in Ashland, Ky. on Sept. 21, 2010. Williams, a Republican candidate for governor, traveled parts of the state to help raise money for local candidates and to meet with local newspapers.

Kentucky Senate President David Williams gestures during an interview in Ashland, Ky. on Sept. 21, 2010. Williams, a Republican candidate for governor, traveled parts of the state to help raise money for local candidates and to meet with local newspapers.

Georgia’s Republican-controlled legislature established the Special Council on Tax Reform and Fairness last year to recommend changes to that state’s tax code. The council was designed to take the politics out of the hot-button issue of taxes. But that hasn’t happened, as Democrats and even some Republicans say they oppose its proposals, which that state’s legislators are reviewing.

“There is something in there to make everybody mad,” said Alan Essig, executive director of the Georgia Budget and Policy Institute, a nonpartisan, nonprofit think tank.

Williams introduced a bill last month to set up a council to study Kentucky’s tax system and propose changes to the 2012 General Assembly. The bill passed the Senate 25-13, with the support of all Republicans and some Democrats, and is now before the Democrat-controlled House, where its prospects for passage aren’t clear.

Georgia’s tax reform council recommended eliminating many sales tax exemptions, including for groceries. It also recommended increasing the state’s cigarette tax — which is lower than Kentucky’s — and phasing in an income tax reduction.

Similar proposals have been made in Kentucky, where experts have suggested that the General Assembly should remove tens of millions of dollars’ worth of sales tax exemptions and expand the sales tax to cover services. Like Georgia, Kentucky exempts groceries from the sales tax.

Debate in Georgia

In Georgia, the proposal to tax groceries outraged progressive Democrats who said it would hurt the poor. Democrats generally gave the plan poor reviews.

“My overall reaction is that this is not much of an improvement over our current tax system,” said Georgia Sen. Robert Brown, a Democrat. “Essentially what this proposal does is shift the burden to lower- and middle-income citizens.”

Comprehensive tax reform has been an issue in Kentucky for years, among Republicans and Democrats alike. They contend that the tax code is antiquated and not in line with a modern, service-based economy. They also say tax revenue fluctuates too much during economic downturns.

The legislature made some changes to the tax code in 2005, but many say that reform didn’t go far enough.

In Georgia, Republicans control the House, Senate and governor’s office, but even including tax cuts in the council’s plan hasn’t made all Republicans and their allies enthusiastic about it.

Americans for Tax Reform, a Washington, D.C.-based group of fiscal conservatives, said that it opposes Georgia’s tax reform plan and that Georgia lawmakers who signed its no-tax pledge would be violating it if they vote for it.

“A significant reduction in marginal tax rates is long overdue in Georgia, which is wedged between two states — Tenn. and Fla. — that levy no personal income tax at all,” the group’s president, Grover Norquist, said in a statement. “But if the goal is to use such reductions to mask bigger tax increases on groceries, tobacco and a variety of services, it is not even worthy of a conversation.”

Effort in Kentucky

Americans for Tax Reform also circulates its no-tax pledge in Kentucky, where four senators and 24 House members have signed it. Williams didn’t sign it, and he said it’s tough to convince Norquist that a tax reform bill is revenue-neutral. He has said he doesn’t know whether recommendations from his proposed council would be revenue-neutral.

Williams said he expects opposition to any tax reform proposal in Kentucky.

“There will be a lot of people that don’t like it, Republicans and Democrats,” he said.

In Georgia, a special legislative committee is studying the proposal from its council and will decide which elements, if any, to include in a bill for the full legislature to consider.

The legislation creating the council forbids amendments, and a bill can only be voted up or down.

“The Council has proven to be uniquely beneficial because we were able to bring experts to the table that had never desired to be involved at the political level,” Georgia Sen. Bill Heath, a Republican, said in a statement. “I am optimistic that these findings will be useful as we continue to review their report diligently and with great purpose.”

A spokeswoman for Georgia Senate Republicans said they wouldn’t make any Republicans available for further comment.

Essig said he fears that Republicans on the special committee will cherry-pick elements of the reform proposal they like — namely tax cuts — and forgo those that broaden the tax-collection base.

“It will take real leadership” to pass it, he said. “There are no overriding supporters of the whole thing.”

Williams’ bill calls for a Kentucky tax reform council to be made up of a group of independent economists; tax experts would make a recommendation that the full legislature, as in Georgia, would have to consider on an up-or-down vote — without amendments.

Unlike in Georgia, there’s no provision for a special legislative committee to consider the ideas first.

“When it gets to the legislature, people can decide if it’s more good than bad,” Williams said. “I firmly believe this is the best way to approach it.”

Kentucky’s legislature will reconvene Tuesday.

Gov. Steve Beshear, who would face Williams in the fall election if Williams wins the Republican primary, has said he doesn’t think now is the time for tax reform because it would likely increase taxes on certain individuals and businesses. He said taxes shouldn’t be raised during an economic downturn.

House Speaker Greg Stumbo, D-Prestonsburg, doesn’t think an independent council is necessary and said lawmakers should tackle the issue on their own.

“With an issue this important to the state, I want to see legislators play an active role, not merely give an up-or-down vote,” he said in a statement. “That’s not what the people of Kentucky sent us to the Capitol to do.”

source: www.courier-journal.com

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