Business
(2009-03-31)
Listen Now:
null
A handful of U.S. hundred dollar bills is displayed in an undated file photo
"There are just six states that tax more than 100 of these 168 services, and those states are Delaware, Hawaii, New Mexico, South Dakota, Washington and West Virginia. Kentucky is at the bottom end of states that do tax services," Canagaretna said.
Taxing a wide variety of services at a lower rate makes sense to many experts, Canagaretna said. He thinks it will generate additional revenue for the state.
Expanding the tax base or increasing the sales tax by just one cent are two options being considered in the Kentucky Senate. Budget Committee Chairman Charlie Borders and other Senators believe creating a fairer, more up-to-date tax structure could create jobs.
"[Taxing services] could result in our people paying less taxes, but we collect more revenue. Individually you may pay less taxes. If you have more people working on the payroll, they are going to pay more taxes," Borders said.
"Business gets it," according to Bob Babbage, a lobbyist for several dozen Kentucky businesses.
"Something has to change about the way government works from a revenue side. Just as companies have changed time and time again in the last 50 or 60 years, government has not," he said.
Babbage is a frequent visitor to the state capitol. He believes policy makers should steer clear of up-and-coming sectors of the state's economy.
"Do not tax the growth part of your state and penalize it because it's the growth part, like technology or health care. They could lift us out of the recession sooner than other areas, like automotive or what-have-you," he said.
Higher sales taxes can cause consumers to buy less, and thus adversely impact businesses, Babbage said. Likewise, he believes if corporate taxes go up, the added cost will be passed on to consumers, who will then buy less.
Some communities have lobbied for the right to increase local sales taxes. It's going on in other states, according to Sujit Canagaretna.
"When you factor in some states that have a local option sales tax, it could be as much as 10 and 11 percent. There are certain counties in Tennessee that are at the double digit levels," he said.
Some in the Kentucky legislature argue expanded gambling at horse tracks could bring in new money. Expanded gambling could even be a topic for a special session of the General Assembly before year's end.
Richmond Representative Harry Moberly, who chaired the House Budget Committee for X years, doesn't think a gaming debate would take the wind out of the effort to change the tax structure.
"We would need the revenue from expanded gaming as well as tax reform, and we need to make our tax system fairer, so I think they are two separate issues. Both could help us meet our budget deficit and help move the state forward, in education particularly," he said.
Expanding the sales tax to more services would help grow revenue as the economy grows, Moberly said. He doesn't think the state could afford to do away with its income tax system entirely, as some states have done.
For years, Louisville Representative Jim Wayne has lobbied for a fairer tax system. He believes lawmakers are often skittish to move on comprehensive tax changes.
"A main obstacle has been the group that has pushed for no new taxes. If you're taxing the wealthy, they also have their supporters here in the legislature who say we are taxed enough and we don't want any more taxes. That's not accurate, but they can lead legislators down that road," he said.
Representative Wayne and other advocates for low income Kentuckians have pushed for a state earned income tax credit for several years.
"If the people are working, they get a boost in their salary, not only from the federal government with an earned income tax credit, but also an additional 15 percent from the state government," he said.
Wayne believes the time to act on a major tax overhaul is now. He says with every crisis also comes an opportunity.
Eventually, all of this discussion could reach the individual taxpayer. Joyce Mitchell of Lexington recently sought tax preparation assistance through a free service at a nearby library. Mitchell believes there are advantages to scaling back income taxes and shifting to a more sales tax oriented scheme.
"I always like to pay as I go and not have to pile something up and have a big sum to pay later on. I guess that would be paying a little extra with every purchase," she said.
Bill Maltby has lived in Lexington for nine years. He came to Kentucky from northern Virginia where he says he was accustomed to paying a tax on services. He would be okay with Kentucky making that change.
If state lawmakers do change the tax structure, they will probably take some time to come to consensus. Any effort to develop a new state tax program would likely not happen until 2010.
© Copyright 2012, WEKU
