- Associated Press - Friday, January 31, 2014

FRANKFORT, Ky. (AP) - Gov. Steve Beshear is expected to pitch his plans to revamp Kentucky’s tax code in a meeting with legislative leaders next week, beginning what the House’s top leader said Friday could be an “uphill struggle.”

Beshear asked top lawmakers to meet with him Monday to talk about proposals that could affect taxpayers across the state, House Speaker Greg Stumbo and Senate President Robert Stivers said.

“Right now, it’s a wait and see,” Stumbo, D-Prestonsburg, told reporters. “People are respectful of the governor … they respect his request to wait and see what his proposals are before we pass judgment on them.”

But Stumbo added that any tax overhaul effort would likely face “an uphill struggle.”

This year’s 60-day General Assembly session will be one-third complete Tuesday. Lawmakers still have to craft a new two-year state budget in a session in which elections are looming later in 2014.

Beshear spokeswoman Kerri Richardson said Friday that the governor will reveal his tax modernization plan to the public next week.

Stivers said the meeting between Beshear and legislative leaders will be the first step in what could be lengthy discussions. Beshear has talked in mostly broad terms about what he would like to see in a potential tax overhaul but hasn’t provided details, which Stivers said would benefit the discussions

“It gives us a lot more latitude to have very … open discussions,” he said.

Nearly a month ago, in his State of the Commonwealth speech to lawmakers, Beshear acknowledged tax modernization is a “sensitive topic,” especially in an election year. But he said voters elected them to tackle difficult issues.

The Democratic governor has said he wants a simpler tax code that would generate enough revenue to meet state needs even during recessions. Kentucky was hit hard by the last economic recession, prompting Beshear to cut about $1.6 billion from the state budget since he took office in 2007.

Beshear recommended another $98.6 million in spending cuts in the two-year budget proposal he recently submitted to lawmakers to help free up more money for education.

Beshear appointed a tax reform panel, chaired by Lt. Gov. Jerry Abramson, that presented a plan late last year. Its recommendations included expanding the state’s sales tax to a litany of services that have traditionally been exempt in Kentucky.

The plan also called for reducing revenue from corporate taxes by more than $90 million in hopes of making Kentucky more attractive to companies looking to relocate.

Stumbo on Friday questioned the need to give more tax breaks or incentives to thriving companies.

“We’ve really incentivized our tax code to the point where we’re giving away more money than we’re taking in,” he said.

Stivers, R-Manchester, mentioned corporate and individual income tax rates and the ad valorem property tax levied on aging bourbon barrels as among the myriad of tax issues he’d like to discuss.

Kentucky’s bourbon industry is pushing for a corporate income tax credit to offset the taxes it pays every year on whiskey barrels aging in warehouses.

“It really puts our homegrown bourbon industry at a disadvantage when we’re competing in the global marketplace,” Kentucky Distillers’ Association President Eric Gregory said of the tax.

The proposal would guarantee the continued flow of revenue to school districts and other local governments that benefit from the tax, the industry said.

Under the industry’s proposal, distilleries would have to reinvest the credit in their Kentucky operations.

Meanwhile, several lawmakers have proposed a tax reform measure that includes a state earned-income tax credit that would benefit low-income families. It also calls for a tax on certain services used mainly by the wealth, such as chauffeured limousine rides. Other features would limit individual income tax itemized deductions and make a small portion of retirement income taxable.

“Kentucky’s chance to grow and thrive in the future is directly tied to modernizing our tax code,” said Rep. Jim Wayne, D-Louisville, among those pushing the measure.

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