FRANKFORT — The budget outlook presented to House members Tuesday is so bleak that some appeared to at least be thinking tax reform isn’t such a bad idea.

Rick Rand, D-Bedford, chairman of the House budget committee, said he doesn’t see much sentiment among legislative leaders for taking up the issue in the 2010 General Assembly because it’s an election year. But he also said there is likely to be some attempt at tax reform after that.

But of course 2011 is a gubernatorial election year when presumably Gov. Steve Beshear will be running for re-election. And Beshear has repeatedly said of late, “This is not time to be raising taxes on our people and on our businesses.”

House Speaker Greg Stumbo, D-Prestonsburg, said he sees no “appetite from the governor’s office to champion any new revenue or any type of tax modernization which might produce long-term revenue.”

But Stumbo didn’t entirely run away from the idea. After the budget briefing for House members, Stumbo said he isn’t ready to “turn my back on education” and might consider some form of tax increases or reform if the legislature can prove to voters they’ve done all they can to manage the state budget by first cutting expenses.

Last spring, the legislature passed a combination of alcohol and tobacco taxes to fill a previous budget shortfall and both Stumbo and Beshear promised a group of Democratic House members they’d give consideration to “comprehensive tax reform” before the 2010 session in exchange for those lawmakers’ votes on the alcohol and tobacco taxes.

But Beshear now says the economy is too bad to risk raising any taxes – including some which might be offset by lower taxes as part of a larger reform of the tax code.

One of those lawmakers, Rep. Jim Wayne, D-Louisville, who has sponsored a tax reform bill, said recently he felt “duped” by the governor’s assurance to look at tax reform. Another, Rep. Mary Lou Marzian, D-Louisville, was asked Tuesday if she still had confidence in the word of the governor.

“What governor? What word?” she responded.

But Senate President David Williams, R-Burkesville, told a meeting of the Kentucky Association of Counties recently that the governor and lawmakers should work in a bi-partisan manner to look at tax reform.

There is also a Republican proposal in the House – that of Bill Farmer, R-Lexington, which would eliminate income taxes and extend the sales tax to services albeit at a lower rate than the six percent tax on purchases now in effect. His bill would eliminate most exemptions to the sales tax and lower the rate to 5.5 percent. Wayne’s bill would extend the sales tax to several high priced, “luxury” services but would increase income taxes for the more affluent.

Sen. Damon Thayer, R-Georgetown, Tuesday echoed Beshear’s position that “now is not the time to raise taxes,” but he – like Rand – said lawmakers need to look at the issue carefully for the future.

Thayer said he would have liked for the two chambers’ budget committees to have taken a close look at the two tax reform proposals in the interim between the 2009 and 2010 sessions but there isn’t time to take up such a complicated subject now without having that in-depth review.

The Senate Appropriations and Revenue Committee last June did have an “informational only” hearing on the bills by Wayne and Farmer but took only a cursory look at them before the June special session. The House A&R; Committee, chaired by Rand, had scheduled hearings for the fall, but Rand later cancelled them saying there was no sentiment to take on taxes in an election year.

Thayer conceded he sees “no sentiment in the Senate” for taking up the measure now.

But Stumbo – who also promised a look at the bills last spring when the alcohol and tobacco taxes were up for a vote in the House – at least left the door ajar.

He said one purpose of Tuesday’s budget briefing for House members was to demonstrate just how bleak the budget picture is – especially in the second year of the 2010-2012 biennium when federal stimulus money will have run out.

Stumbo said he thinks it’s likely the federal government will extend the stimulus money to protect states whose budgets are in crisis. But if it doesn’t he said, he’s willing to look at other measures after demonstrating to voters that lawmakers have managed the budget as tightly as possible and can’t avoid cuts to education and human services.

He said he doesn’t believe Kentuckians are “so callous” they wouldn’t prefer increased revenues to cutting education and he pointed to the “largest tax increase in history” in 1990 when the Kentucky Education Reform Act passed.

“We saw the vast majority of members returned to office” after that, Stumbo said, because “Kentuckians were convinced we truly needed the money to continue our progress in education.”



Ronnie Ellis writes for CNHI News Service and is based in Frankfort, Ky. He may be contacted by email at rellis@cnhi.com. Follow CNHI News Service stories on Twitter at www.twitter.com/cnhifrankfort.