KY Tax Reform to enhance tax resources

11/3/2007
tax reform with reduced growth rate in state tax expenditures to solve deficit

Fiscal Year Total Revenue Debt Service App Debt Service/Rev
1990 (3.561) 5.814.85 304.43 5.24
1991 (4.312) 6,143.23 314.66 5.12
1992 (4.316) 6,419.98 394.44 6.14
1993 (4.512) 6,578.18 394.76 6.00
1994 (4.647) 6,800.82 395.95 5.82
1995 (5.154) 7,554.79 424.65 5.62
1996 (5.337) 7,759.59 435.72 5.62
1997 (5.663) 8,188.75 459.56 5.62
1998 (6.012) 8,675.10 457.44 5.27
1999 (6.196) 9,123.43 460.88 5.04
2000 (6.549) 9,496.30 556.47 5.86
2001 (7.040) 10,496.66 553.75 5.50
2002 (7.082) 10,609.11 653.96 6.16
2003 (7.203)
2004 (7.420)

CBER, 2001 Kentucky Annual Economic Report, Table #3, p.5
( ) =Senate A&R Committee Chair Analysis, Jan. 1995

From this report the following tax reform scenario could be debated: This approach would create a tax system this is adequate, competitive, fair and simple and start our State towards promoting global competitiveness of individuals and business, and provides for the common wealth.

1)Create a 3% sales tax rate applied to daily Corporate services used by the Genreal Public, such as telephone, computer and the like

2)Reduce current sales tax rate for goods to 3% eliminating industry sales tax exemption and continuing food sales tax exemption.

3)Reduce individual rates for all income tax filers to 5.5%, after making sure those current state income non-filers estimated in ’92 to number 75,000 are in compliance with current tax system:

To the GENERAL FUND:

establish budget reserve trust fund of 5% and improve cash flow collecting all taxes due

direct state tax collecting agencies to collect all taxes with the financial wherewithal to conduct comprehensive tax compliance and education programs that promote both voluntary and involuntary compliance and

implement a state management data base to enhance revenue forecasts and provide leadership in the executive branch and legislative branch with detailed analysis of impact of various taxes on classes of individuals and businesses, including the ability to provide “what if” answers and

GENERAL FUND TAXES:

Maximize the economic impact of tax credit development incentives by requiring follow up to determine if companies are complying with terms of the tax incentive agreement

repeal the public service corporation (PSC) property tax

repeal the rural electric telephone cooperative corporation tax of $10 per provider

Whenever the legislature decides to implement Constitutional Exemption #2, exempting owners of “cars” from the state’s portion of vehicle taxes, address Kentucky's 3 truck taxes currently paid in 2008; i.,e., truck registration fees, weight-distance and fuel taxes, by eliminating the weight-distance tax. While reducing truck tax burden, eliminate unfair tax burden on intrastate Kentucky truck owners by making interstate Kentucky truck owners liable for Kentucky usage taxes.

Reference study done by Subcommittee on Vehicle Regulation and commercial Transportation requested by Representative Little for the ’96 General Assembly.

Review 1994 suggestions from ’94 Commission on Quality and Efficiency suc as:

Move from a defined benefit to a defined contribution program for new state employees saving an estimated $3.8 million

Merge administration and support services of the Kentucky Employees Retirement System, the County Employees Retirement System, the State Police Retirement System and the Teachers Retirement Systems saving an estimated $9.5 million

Move the property tax collection from the Sheriff to the Revenue Cabinet and allow all delinquent property tax collections to be a function of the cabinet saving an estimated $55.5 million

If not already done, the finance and Administration Cabinet should review, update and implement the 1987 automated purchasing study saving an estimated $25.2 million

If not already done, conduct a comprehensive economic impact study of the “extended weight Haul road system” on the coal producing economy of the State saving an estimated $55.5 million

If not done, implement TWIST- a statewide case management system-as described in the ‘94-96 Information Resources Plan saving an estimated $20.8 million

If not done, eliminate excess layers of management [eliminate all assistant positions in state government] and place more emphasis on direct service employees saving an estimated $30 million-

Review to eliminate, modernize to significantly slow growth rate of state tax expenditures siphoning off billion of state tax revenues needed to fund social programs

This is food for tax reform debate that includes a reduction in growth rate of state tax expenditures.

Sincerely,
Bill Huff
113 N. East St
Harrodsburg, Ky. 40330-1244
859.734.2228
bhuffjr@searnet.com