Saturday, March 30, 2002

Tax issues occupy both houses of Ky. legislature

But leaders don't agree on direction tax reform will take

By Mark R. Chellgren
The Associated Press

        FRANKFORT — Like the different approaches taken by their respective budgets, House and Senate leaders have divergent views on whether they will take up tax reform to make up a spending gap.

        House Democratic leader Greg Stumbo said House and Senate members are looking at some items that would add a bit of money to the coming two-year budget and help straighten a tax system that has not kept up with economic growth.

        “I think they are seriously considering doing a limited amount of much-needed reform by closing some loopholes,” Mr. Stumbo said Friday.

        Senate President David Williams said he did not share Mr. Stumbo's assessment. While Mr. Williams acknowledged he has said he would favor some tax changes, he said Friday it is “not my goal to do that.”

        Budget negotiations began Thursday, but were sidetracked by the wrenching debate over legislation on human cloning that opponents said would also end significant medical research in Kentucky. Meetings were also scheduled — but never held — on Friday. Instead, the Senate slogged through a mountain of bills, some of which had been on its table since Jan. 31.

        Negotiators did agree to take up the budget during meetings today.

        The two-year spending plans crafted by the House and Senate are identical in most respects, but a few of the differences are significant.

        For example, House members applauded the Senate for appropriating money for a raise for non-teaching school personnel.

        But the House took issue with where the Senate found a significant portion of that money — eliminating the state's fledgling system of partial public financing of gubernatorial races.

        “There's a major sticking point, I think, on the whole campaign finance issue,” said Mr. Stumbo.

        House Speaker Jody Richards called it a “deal killer.”

        Senate Republicans said public financing has not worked and could turn out to cost far more than the $9 million appropriated.

        In addition to spending money, the budget also includes some provisions that make important policy statements. A Senate section, for example, would prohibit the attorney general from examining the records incentive programs administered by the Economic Development Cabinet.

        Most of the tax proposals that might come up have been floated in the last few weeks by Rep. Harry Moberly, chairman of the House Appropriations and Revenue Committee.

        They include fairly obscure items, such as redefining when a company does business in Kentucky and is therefore subject to income tax, subjecting the new corporate identities of limited liability organizations to corporate license taxes and eliminating the deduction for the income taxes companies pay to foreign governments. A juggling of the way the state property tax rate is calculated to match the system used by local governments is also under consideration.


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