How to Fix a State Budget Shortfall: Kentucky Youth Advocates Weighs In

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By now you're familiar with the basic outline of the story. Our broader economic troubles have translated directly into state budgetary nightmares, and in most cases, the natural inclination of policymakers has been toward slashing services. As a recent op-ed from the Kentucky Youth Advocates points out, however, "making up the shortfall with nothing more than cuts in spending will cause serious, and in some cases permanent, harm to [any state's] residents and infrastructure".

In addition to the Kentucky governor's proposals to tap the rainy day fund and increase the state's abnormally low cigarette tax rate, the op-ed goes on to suggest:

  • "Adding a 1 percent surtax on incomes of $500,000 or more... [or, alternatively], adding a 1 percent surtax on the richest 1 percent of taxpayers in Kentucky."
  • "Kentucky also can follow the example of some 20 other states and close corporate tax loopholes so that multi-state corporations operating in Kentucky can no longer avoid paying state taxes by setting up subsidiaries in other states."
  • "If the Commonwealth makes its own tax law, instead of blindly following federal law, we can "decouple" some of our tax policies from the federal tax code, especially in taxing domestic production. That alone would produce an additional $30 million dollars in 2010."
  • "Finally we can broaden the tax base by enacting an equitable way of taxing services to provide sustainable revenue, particularly during economic slowdowns when the manufacturing sector slows."

Echoing a concern that should be on the minds of many states, the op-ed points out that absent changes in the way the state raises revenue, "the state will still face cuts in 2009, shortfalls in fiscal year 2010 and continuing problems in the years to follow. Even before the recession, Kentucky's annual revenues were not adequate to meet its annual expenses, and Frankfort balanced the budget by using gimmicks". Click here to read the full op-ed, or here to visit the Kentucky Youth Advocates' website.

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