Tax reform and pension issues top of mind for both parties in state House

UPDATED WITH VIDEO: Looking ahead to the 2017 session of the General Assembly, lawmakers from both sides of the aisle sat down with the Kentucky Chamber at the 2016 Business Summit and Annual Meeting to discuss the fall elections and where they believe control of the House will stand as well as the main issues they feel are most important to the commonwealth.

At the Chamber’s Business Summit Friday, House Republican Leader Jeff Hoover and Democratic state Rep. Brent Yonts sat down with Jacqueline Pitts, Managing Editor of The Bottom Line, to discuss politics and policy for a business audience ahead of the fall elections where control of the state House is at stake. Rep. Yonts was filling in for House Speaker Greg Stumbo who had something come up in his hometown of Prestonsburg.

Kicking off the discussion with questions about the House races and how each party believes they will fare in the fall, Leader Hoover said he believes there are many very competitive races across the state this year and that Republicans have strong candidates in almost every district which will earn them enough seats to take the majority in 2017.

Hoover also pointed to the “Republican wave” in the state which elected Gov. Matt Bevin by a large margin and also got many GOP candidates elected into statewide offices in 2015, adding that Republican voter registration is far outpacing Democratic voter registration in the state in recent years.

In contrast, Rep. Yonts said the Democrats will not only keep the majority but pick up 2-4 seats in the fall, adding he believes the state House races are more local which is why Democrats have been able to keep the majority while the state trends more and more red on every other level.

Addressing the concept of the “Republican wave”, Yonts pointed to the special elections held earlier this year where Democrats won the majority of those races and said while the presidential race may have some impact on the races this year, he does not believe it will be enough to flip the House.

When asked what the top priorities of each caucus were in the coming legislative session, tax reform and the state’s persistent pension problems made the top of the lists for both Hoover and Yonts.

As for specifics on tax reform, Hoover said he would like to see a shift to a consumption-based tax system, an end to inventory tax and see a reduction in sales tax exemptions.

In response, Rep. Yonts said changes to sales taxes hurts lower income Kentuckians and said he believes it should not be considered without changes in other areas as well.

When it comes to common ground between the two parties in the House on tax reform, Yonts brought up the local option sales tax initiative, also known as LIFT, that has been co-sponsored by Hoover and Stumbo along with other bipartisan members and passed the House for two years in a row but has been stalled in the Senate. LIFT has been supported by the Kentucky Chamber.

In response to the question on how serious each House caucus is about finally tackling tax reform after decades of talk on the issue, both lawmakers acknowledged the political reality of how difficult tax reform can be for legislators as no one wants their constituents to think they are raising their taxes.

In the discussion, Yonts added that he believes if he and Hoover sat down together, they would be able to hammer out a plan for tax reform that lowers many rates and increases the revenue the system brings in. But getting any tax reform plan passed, he said, is easier said than done.

Pension reform was a big topic of discussion as well as the panelists were asked about the elephant still remaining in the room: the idea of moving the Kentucky Teachers’ Retirement System (KTRS) to a 401k-style plan.

Leader Hoover said he has concerns about moving to this type of plan because of the unknowns including the cost of moving to such a system and the unfunded liabilities left behind when making the switch, which new members will no longer be paying into if they were under a new plan, which would leave the state to make payments on that in addition to the the new system.

Hoover did however say that it is an option that needs a real, thoughtful discussion as something must be done to address the system’s problems and both sides need to understand all options that could potentially be on the table.

Rep. Yonts, on the other hand, said there is absolutely no way he would support moving to a defined-contribution system for teachers as they do not get social security, unlike state workers who are members of the Kentucky Retirement System (KRS), and their pension is their only security in retirement.

When asked if they believe a 401k-style plan could pass both legislative chambers and reach the governor’s desk even if the GOP controlled both houses and the governor’s office, Leader Hoover expressed doubts it could get through his caucus as he said many still have questions about such a switch.  Rep. Yonts said he didn’t believe there was any way it could pass, adding that there would be a major outcry from teachers in the state.

Watch the full panel here: