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June 2012
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Kentucky needs pro-growth tax reform


In his recent State of the Commonwealth speech Gov. Beshear promised "to present â ¦ this session a tax modernization proposal with specific recommendations on how to move our tax system into the 21st Century."

Finally! At long last! Belated bravo! Better late than never!

Beshear should have offered a tax reform proposal years ago. He has apparently done little, if anything, to build either public or legislative support for the plan he will soon bring forward.

The governor indicated that his proposal will reduce the top corporate and individual income tax rates, broaden the tax base in sales and retirement tax areas, establish an angel investor tax credit for certain investments in small businesses, expand research and development tax credits to human capital, and help Kentucky-based companies.

These concepts come from the Blue Ribbon Commission on Tax Reform that Lt. Gov. Jerry Abramson chaired. Each of them has considerable positive potential depending on the specifics.

Republicans might prefer better, bolder, or broader reforms. Regardless, they should work with Gov. Beshear and the Democratic majority in the House of Representatives to pass any proposals that will help create new jobs in Kentucky.

The General Assembly's top Republican, Senate President Robert Stivers, sounded an appropriate note. "We have very much an interest in seeing a competitive tax code," he said, meaning one that is "business friendly" and "expands the base."

The local option sales tax also merits Republican support. Beshear is backing the idea of letting communities vote on small sales tax increases for limited purposes and periods.

Louisville mayor Greg Fischer deserves credit for energetically advocating that concept. Opponents derisively refer to it by the acronym "LOST," but the GOP should be open to putting more flexibility and power in local hands.

Beshear wisely omitted any reference to Democratic Speaker of the House Greg Stumbo's job-killing plan to raise the state minimum wage from $7.25 per hour to $10.10 per hour. That bad idea borrowed from President Obama is nothing more than a political ploy anyway, and Beshear rightly ignored it.

The agenda that Senate Republicans unveiled before Beshear's speech was fine as far as it goes. The top priority of the upper chamber's GOP is a constitutional amendment allowing the legislature to overturn certain regulations between sessions. It may be hard to get the grassroots too fired up for that.

Republicans also propose limiting general fund-supported debt to 6 percent of general fund revenues, banning lavish pensions when legislators take judicial seats or high-paying executive branch jobs, requiring women to meet face-to-face with the doctor before having an abortion, and more aggressively attacking the state's growing heroin problem.

Unfortunately, none of these praiseworthy priorities closely connects Republicans with what should be their polestar principles of job creation and prosperity. The GOP should have made a right-to-work law and pro-business tort reform their main aims.

It is also too bad that Stivers opposes Beshear's call for a statewide ban on smoking in public places. Beshear is on target when he says that, "Tobacco use is the single-biggest factor negatively affecting our health." The business community supports statewide smoke-free legislation, and fortunately other key Republicans do, too.

Soon Gov. Beshear will unveil his budget proposals. There will be blood. But passing pro-growth tax reform is an essential first step toward improving the state's economic situation.

So here's hoping the specifics of the governor's tax reform plan fit that bill. If they do, Republicans ought to work with him. There is no more time to waste in a state that is still so far behind in so many measures of quality of life.

John David Dyche is a Louisville attorney and a political commentator for WDRB.com.

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