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Ky. lawmakers start review of tax overhaul plan
Question of the Day
FRANKFORT, Ky. (AP) - Lt. Gov. Jerry Abramson told lawmakers Tuesday that a wide-ranging tax plan unveiled by his boss represents the administration’s “best shot” at making Kentucky more competitive by reshaping the tax code.
“Nothing in here is in stone or in concrete,” Abramson told the panel during its first public review of the proposal. “We’re at a point where the discussion needs to begin. … And this is our best shot in terms of what we see in a balanced approach that will move the commonwealth forward.”
Committee Chairman Rick Rand praised the second-term Democratic governor for having the “political courage” to present a comprehensive tax overhaul plan, which comes in an election year.
“We all know what happens - it gets picked apart, holes shot in it,” Rand said. “But nevertheless, it has to be out there so we know what we’re talking about.”
Then came a series of questions and critiques from committee members.
Rep. Jim Wayne, D-Louisville, said the proposal contains “many sound ideas,” but said it has some shortcomings in achieving the goal of tax fairness.
Wayne praised the proposed refundable state earned-income tax credit, but said it needed to be bolstered to provide more help to low-wage earners. And he expressed concerns about extending the state’s 6 percent sales tax to such services as the cost of labor for auto repairs.
“For low-income folks, that can hit hard,” Wayne said.
Rep. Jody Richards praised the inclusion of expanded tax credits to encourage business growth. But he expressed concerns about a provision to reduce a pension income tax break for higher-income retirees.
The plan would reduce pension income tax breaks for people with annual gross incomes of more than $80,000. Currently, the state does not tax the first $41,110 of retirement income of any taxpayer regardless of income. That exclusion would be reduced - but only for a taxpayer whose adjusted gross income is more than $80,000. And the exclusion would be phased out for taxpayers with annual incomes of more than $100,000.
Richards, D-Bowling Green, said the $80,000 threshold seems like “quite a bit now” but worried that reducing the pension tax break would help erode pensions that can dwindle late in life.
“I have known so many people in my life who have had quite a bit of money when they retired … and lived to be 95 and often they have just simply run out of money,” Richards said.
He suggested adding an “escalator” to gradually increase the threshold amount in future years, noting that in a decade from now, $80,000 “won’t be a lot.”
That pension-related proposal would affect about 90,000 of the state’s 1.8 million tax filers. Social Security benefits would remain exempt.
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