In the aftermath of the 2018 session, legislative leaders who helped craft a budget for the next two years along with a tax reform package to help balance the budget say the odds were low on the passage of tax reform at the beginning of 2018 and there will be more work to be done in the coming years to the state’s tax code.
When asked if it was the plan all along to pass a tax reform package during the 2018 session, Acting House Speaker David Osborne, Senate Majority Leader Damon Thayer, and Senate Appropriations and Revenue Committee Chair Chris McDaniel agreed that they did not plan to pass tax reforms and stated many members of the House and Senate did not want to take on the issue this year. However, because of the need for additional revenue and the pension crisis faced by the state, they needed to craft a package that would help create a budget that funds important areas of state government and makes Kentucky more competitive.
Sen. Thayer said the tax reform package finally came together in the final four legislative days after the odds were very slim in the beginning of the year.
As for how significant they believe the tax reform package they passed is, the leaders stated they would rank it at around a five on a scale of one to ten and how much further they would like to go with tax reform and cited things like the inheritance tax, excise tax, and others they want to address.
“When you ask 138 legislators what tax reform should look like, you will get 138 different answers,” Acting Speaker Osborne stated in discussing the difficulty of passing a tax reform package and what will need to come next.
Thayer stated he believes there will be an even larger appetite to further address tax reform once the 2018 elections are over as he thinks the policies passed in the last two years will continue to prove to be beneficial and elected officials will want to build on that progress.
Sen. McDaniel added members of the legislature want and need to hear from their local businesses and constituents about how reforms are impacting them and what else needs to be done in order to continue the momentum behind changes to the state’s tax code.
As for the problems continuing to face the state and why the state could need more growth in revenue, McDaniel said pensions and Medicaid will continue to consume the majority of state revenue growth as the amount needed for those government services grows exponentially.
Osborne stated Kentucky is “still a poor state with a lot of needs” and added the legislature will have to continue to be disciplined in their approach to spending and balancing the needs of all areas of state government.
Kentucky Chamber President and CEO Dave Adkisson asked about the potential for an increase in the gas tax or a change in Kentucky’s Road Fund formula as the state struggles for funding to improve and maintain infrastructure in the state.
Sen. Thayer said more education needs to be done on the issue as the gas tax is a difficult issue and a tough political lift for legislators as it is a tax paid and noticed by all citizens.
Similar to what he said in a recent exclusive interview with The Bottom Line, Acting Speaker Osborne said the problem with the infrastructure funding formula is far deeper than just raising the gas tax and will require a more comprehensive approach.