This week in Frankfort, the state House of Representatives dropped its version of the budget, which scaled back some of the cuts proposed by Gov. Matt Bevin. Lawmakers are more than two-thirds the way through this year’s legislative session and talk of tax reform has resurfaced, and it’s still unclear how some major issues will shake out.
Every two years, lawmakers have to write a new budget—a plan that dictates how state government spends its money. Public schools, state universities, pensions, Medicaid, social workers, prisons and a whole lot of other state programs and agencies all have to vie for a limited pot of money—about $21 billion.
But Republicans in the state House of Representatives are trying to make that pot of money a little bigger—by raising taxes on cigarettes and pain pills.
Raising taxes is an unusual move for Republicans in Kentucky, many of whom have campaigned against doing so. But Kentucky’s dire financial situation has made it a little more tempting.
Rep. David Hale is a Republican from Wellington.
“Undoubtedly this is a very risky political vote for me to make, as it will be for a lot of people in here. But I came to the conclusion that if we are just worried about our political careers by the votes we take, we probably shouldn’t be on this floor anyway.”
The increase would generate about $250 million per year by raising the cigarette tax by 50 cents per pack and creating a 25 cent tax on opioid prescriptions—to be paid by drug distributors.
Gov. Bevin released his version of what the budget should look like back in January—it cut most spending by a little over 6 percent, zeroed out funding for 70 programs across state government and set aside a record $3.3 billion for the ailing pension systems.
The House’s tax bill helps allows them to roll back SOME of Bevin’s cuts in their version of the budget—undoing reductions made to state universities and public school transportation.
House Budget chairman Steve Rudy said the state doesn’t raise enough revenue to pay for state services.
“This is enough of a placeholder where we can pass a budget that fully funds our pensions and will get us through to the next year should we not be able to get comprehensive tax reform done.”
Comprehensive tax reform has been a buzz-phrase in Frankfort for decades. Kentucky consistently fails to bring in enough tax revenue to pay for the budgets passed by lawmakers, and there’s always been talk that the state should revamp its tax code to bring in more.
But politically, it’s unpopular. When Democrats were in power, they worried that if they voted in favor of any tax increases, they’d get ousted by Republicans.
Now that Republicans have control of the legislature and governor’s office, they’re worried they’ll get voted out during primary elections if they pass something that’s considered to be a tax increase.
Rep. James Tipton, a Republican from Andersonville, said he would vote for tax reform despite the political risk.
“Our citizens expect us to do that, they demand us to do that. And folks, if I take a vote that gets me beat, I’ll have more time to go fishing.”
Like Bevin’s budget, the House’s version also sets aside a record $3.3 billion for the state’s ailing pension systems.
The budget bill now heads over to the state Senate, where it sounds like the standalone tax increases on cigarettes and opioids might have a harder time to pass.
Senate President Robert Stivers expressed skepticism, but said he’d be willing to consider a broader plan.
“If you’re saying individually a tax increase, I can tell you that’s not going to happen in the Senate. Now if there’s comprehensive tax reform that you look at all areas, you look at loopholes, you look at getting rid of some taxes, increasing others in a comprehensive tax reform, that’s possible”
Republican leaders of the legislature also had a public hearing on the new version of the pension bill, which would move most future work
After pushback lawmakers say they’ll tweak the bill again.