From Foresight, Vol. 8, No.3
published 2001
A capacity crowd, one of the largest in Kentucky Long-Term Policy Research Center conference history, packed Frankfort’s Capital Holiday Inn on November 14, to consider the challenges and opportunities of financing state and local government. Some of the state’s, and the nation’s, leading experts on tax policy were on hand to discuss the strengths and weaknesses of the state’s tax structure and offer insights into how and whether it might be improved.
An issue that has loomed large on Kentucky’s political landscape for many years, tax reform or tax modernization, as it has come to be called, has taken on a new urgency, as the state confronts a huge revenue shortfall and resultant cuts in programs.
In spite of the careful examination and informed recommendations of a series of deliberative bodies that have issued recommendations in years past, the state’s overall tax structure has remained essentially unchanged. Over the course of the past year, the state’s tax structure has again been scrutinized, this time by a legislative subcommittee. It has hired a nationally recognized tax policy consultant to offer recommendations on how best to modernize the system and ensure the capacity needed to remain viable in the face of demographic, social, and economic changes. Originally scheduled to be the conference’s keynote speaker, the subcommittee’s consultant, Dr. Bill Fox, was unable to attend the conference due to illness.
For its eighth annual conference, the Kentucky Long-Term Policy Research Center engaged leading budget and tax experts and those in attendance in a dialogue about key questions, including:
What is the ideal tax system and can it be achieved?
How are other states meeting the challenge of tax reform?
What do Kentucky’s executive and legislative leadership see on the fiscal horizon?
Is Kentucky’s tax burden on families fairly distributed?
Are Kentucky businesses being taxed too much or too little for the state to remain competitive?
What are recent trends in local taxation and what is the future likely to hold for our smallest governments?
Following welcoming remarks by Rep. Steve Nunn, Chair of the Kentucky Long-Term Policy Research Center’s Board, the morning opened with a series of general session presentations. They began with Dr. David Wildasin’s characterization of the “ideal” tax structure, and the careful balance it must achieve. Dr. Wildasin is a professor in the University of Kentucky (UK) Martin School of Public Policy and Administration.
Dr. Merl Hackbart, also a UK professor with the Martin School and a long-time economic advisor to the Commonwealth’s governors and budget officers, followed with a historical overview of the course of tax reform in Kentucky and a discussion of more recent actions in other states. Dr. Hackbart told those on hand that efforts to overhaul entire tax structures in a single legislative action had not succeeded in recent years. Instead, incremental change, principally in the form of tax reductions, has been the norm.
Dr. James R. Ramsey, the Commonwealth’s chief budget officer, followed with a discussion of the worthiness of the state’s current tax structure for the sea of change that lies ahead. Already, he told those on hand, the economic downturn has resulted in what is likely to ultimately be nearly a $1 billion shortfall. As a consequence, the state faces the unpleasant task of making budget cuts that jeopardize investments in the future. If conditions worsen, education may also face cuts.
These morning presentations were followed by a panel discussion that featured Co-Chairs of the Legislative Subcommittee on Tax Policy, which has examined the need for and the possible means of achieving tax modernization over the course of the past year. Sen. Richard “Richie” Sanders and Rep. Harry Moberly discussed the tax reform legislative agenda that will be considered during the upcoming 2002 session of the General Assembly. They discussed several possible options the state has for increasing revenue and the problems and opportunities they pose. Jack Brammer, chief political reporter for the Lexington Herald-Leader, moderated the panel discussion.
The morning of the conference was rounded out with breakout sessions led by Dr. Wildasin, who discussed local taxation issues; Dr. Larry Lynch, a Transylvania professor, who reported on his findings about business taxation in Kentucky; and Dr. Charles Martie, Governor’s Office for Policy Research, who discussed the equity of Kentucky’s tax system from various perspectives. The presenters, along with Dr. Hackbart, are authors of a forthcoming Center volume, Financing State and Local Government: Challenges and Opportunities, which is now available on the Center’s website.
Lunch featured presentation of the Vic Hellard Jr. Award to Kentucky historian, Dr. Thomas D. Clark (see related story, Noted Historian, Dr. Thomas Clark, Hellard Award Winner), and a keynote speech by Council on Postsecondary Education President Gordon Davies, who argued eloquently for the exemption of education from budget cuts.
The conference concluded with a remarkable panel discussion moderated by KET’s Bill Goodman featuring a distinguished group of Kentuckians who influence state and local tax policy. In spite of their diverse interests, the panel was remarkably unified in its support of tax modernization, while supporting prudent, “smart” spending, and urging broad-based public involvement in the dialogue.Ź