KENTUCKY: Out in the Open, But on the Wrong Side of the Fence

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Well, no one could accuse Governor Steve Beshear of failing to take a position on tax reform in Kentucky.  Unfortunately for the citizens and businesses of the Bluegrass State, it’s the wrong position.  In recent weeks, the Governor has made plain his opposition to changing the state’s tax structure, arguing in an opinion piece in the Lexington Herald-Leader that “for many, …‘tax reform’ means raising broad-based taxes on some while lowering them on others….an approach [that] at this time could do immediate damage to the economy, to employment levels and to individual workers.”

To be sure, state policymakers face a very limited set of options in addressing budget shortfalls. They can either cut spending or raise taxes. (Governor Beshear touts gambling expansions in Kentucky as one additional approach, though that option, as other states have found in recent months, has its own shortcomings.)  Still, between spending cuts or tax increases, it’s the latter that are likely to have a less deleterious effect on economic growth, since they will not reduce consumer demand as extensively as spending cuts.

Fortunately, other voices within the state are speaking up in favor of modernizing Kentucky’s tax system.  As the Owensboro Messenger-Inquirer noted recently, “it makes no sense to close off options when the state is facing one of its largest budget shortfalls in history.” This is a common-sense view given that, as the paper further observes, “Kentucky's outdated tax system has left the state's revenue sources dried up, which makes this the right time to act on tax reform.”

For more on the challenges – and the choices – before Kentucky policymakers, see ITEP’s June 2009 report on the subject as well as resources from Kentucky Youth Advocates and Kentuckians for the Commonwealth.

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