The Kentucky Chamber’s advocacy during the 2016 session of the Kentucky General Assembly saved Kentucky businesses an estimated $460 million a year. Here’s a breakdown of how the Chamber’s work generated real savings for the business community.
KENTUCKY ACADEMIC STANDARDS REPEAL
SB 210 and HB 553 would have eliminated the state’s current academic standards (strongly supported by the Kentucky
Chamber) and replaced them with new standards. The Kentucky Department of Education estimates it would take a minimum of $35 million to develop and implement replacement standards. Since Kentucky businesses contribute 40% of all Kentucky tax revenue, the cost to the business community of eliminating the standards would be $17.5 million (40% of $35 million).
TAX ON PIPELINES
House Bills 551 and HB 240 would have established a pipeline safety fund by imposing a per mile tax on hazardous liquids and natural gas pipelines running through Kentucky. HB 240 would have imposed a tax of $120 per mile while HB 551 would have imposed a higher assessment of $250 per mile. According to the U.S. Department of Transportation Pipeline and Hazardous Materials Safety Administration database, there are 35,454 miles of gas pipelines and 916 miles of hazardous liquid pipelines in Kentucky, for a total of 36,370 miles of pipeline.
Based on this, a fee of $120 per mile would have generated $4.364 million per year, while a fee of $250 per mile would have generated approximately $9.1 million annually.
ANTI-BUSINESS TAX REFORM
HB 342 would have made a number of substantial changes in Kentucky’s tax code. In addition to increasing individual income tax rates on higher incomes, capping itemized deductions and phasing out the tax exemption for public and private pensions, several provisions would have had an impact on Kentucky businesses (revenue estimates are from the Legislative Research Commission’s Fiscal Note on HB 342):
- Imposing the sales tax on a number of services to generate an estimated $104 million per year in additional state revenue when fully implemented (Kentucky businesses pay an estimated 50% of all sales taxes for an impact of $52 million per year).
- A combined reporting requirement for businesses to generate $25 million per year in additional state revenue.
- Imposing a “throwback rule” to require income that is not taxed in any other state to be taxed in the home state of the business to generate $16 million per year in additional state revenue.
- Disallowance of business income attributed to foreign operations to generate $25 million per year in additional state revenue.
- Changes to the Limited Liability Entity Tax to generate $13 million per year in additional state revenue.
- Elimination of the Domestic Production Activities Deduction to generate $4 million per year in additional state revenue.
The total impact of these tax changes on Kentucky’s business community would have been an estimated $135 million annually.
MATERNITY LEAVE MANDATE
HB 627 would have required employers with 50 or more employees to provide six weeks of paid maternity leave for an employee who has been employed at least one year. Three states (California, New Jersey and Rhode Island) currently have laws that require paid maternity leave that is funded by employee payroll taxes. In California, each worker pays about $30 per year and taxes are capped at $29 per year in New Jersey.* HB 627 would not have required employees to fund maternity leave, so the cost would have fallen on Kentucky employers. While no published studies are available of the financial impact on Kentucky, assuming costs similar to the California and New Jersey programs, Kentucky employers’ costs would have been approximately $30 per year per employee. The U. S. Small Business
Administration estimates that more than 70% of Kentucky’s employees (approximately 1,050,000 workers) work in private businesses of 50 or more employees. This would have resulted in a cost of approximately $31.5 million per year ($30 per year X 1.05 million employees = $31.5 million per year).
*Source: “What would it cost to have mandatory, paid parental leave,” Fortune, February 5, 2015
SICK LEAVE MANDATE
HB 617 would have required employers to provide earned paid sick leave to employees in the amount of one hour for every 30 hours worked. The U.S. Bureau of Labor Statistics estimates that:
- 58% of workers in the South Central United States (which includes Kentucky) have access to paid sick leave.
- There are 1.59 million non-farm, non-government workers in Kentucky.
- Workers earn an average of eight days of sick leave per year.
- Paid sick leave costs private employers 23 cents per hour worked for all employees.*
- The average employee in Kentucky works 33.4 hours per week.
Based on these estimates, 667,800 Kentucky workers do not have access to paid sick leave. If the average private Kentucky employee works 33.4 hours per week for 50 weeks (1,670 hours per year), the annual cost for providing sick leave to 667,800 Kentucky workers would be $256.5 million per year (1,670 hours X 667,800 workers X $0.23 per hour = $256.5 million).
*Source: Paid Sick Leave in the United States, U.S. Bureau of Labor Statistics, March 2010
MAIL ORDER PHARMACIES
HB 458 would have prohibited insurance companies (including the state employee health plan and Medicaid Managed
Care companies) from requiring the use of mail-order pharmacies. The bill also prohibits insurers from imposing different cost-sharing amounts between retail and mail order pharmacies. Since mail-order pharmacies typically are less expensive than retail pharmacies, health insurance companies often encourage their use to reduce costs and lower premiums. The Fiscal Note filed for HB 458 estimates that limiting the ability to use mail-order pharmacies would cost the state as much as $11.2 million per year in additional General Funds due to increased costs to Medicaid and the state employee health plan. (Kentucky businesses pay an estimated 40% of all state taxes for an impact of approximately $4.5 million per year.) In addition, the Financial Impact Statement filed by the Department of Insurance states that the limitations on mail-order pharmacies would increase costs for all private insurance policies in Kentucky by as much as $13 million per year. Since the Current Population Survey of the U.S. Census reports that 46% of Kentuckians have employer-provided health coverage, HB 458 would have cost Kentucky businesses up to $5.9 million in additional health insurance premiums (46% of $13 million = $5.9 million). The total impact on the business community of HB 458 would have been $10.4 million.
Click the image below to view the full interactive version of the Kentucky Chamber’s 2016 Results for Business publication which details what passed, what didn’t and what it means to your bottom line: