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June 2012
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NON-STARTER Dems not foolish enough to embrace new tax plan

In Kentucky's eternal quest for more tax money, Gov. Steve Beshear on Tuesday rolled out some not-so-new ideas about a tax "overhaul" that in reality is a $210 million a year tax increase.

We suppose you can't blame him for trying. The proposal will be introduced in the Democrat-controlled House next week. But with all 100 House seats on the ballot this November and Republicans within striking distance of taking control of the chamber, it is hard to imagine that House Democrats would actually hand the GOP such a gift.

Beshear seemed to concede as much when he said he will not request a vote on the proposal in either chamber of the General Assembly unless it gains majority support. We are confident it will not, and so much the better.

Not much in the tax package breaks new ground. And not all of it is bad. There is a proposal to raise taxes on cigarettes from 60 cents to $1 a pack. Critics say such taxes disproportionately affect less affluent parts of the population. But given that Kentucky expects to add 300,000 people to its Medicaid roles under its misguided embrace of Obamacare, anything that deters smoking in that segment makes financial sense in the long run.

There are also proposals to reduce the corporate and individual income tax rates, which taken alone would benefit the state economy. But in the end, those and other provisions are mere carrots for the overriding purpose of the plan, which is to rake in hundreds of millions in net new revenue for the state by expanding the sales tax to all manner of presently tax-free services: tire rotations, tax preparation, mowing, bush trimming and - counterintuitively from a health perspective - fitness center fees, to name just a few.

Also larded in are tax breaks for the influential horse industry and the booming bourbon industry. That last one was too much even for House Speaker Greg Stumbo, who remarked, "Someone's going to have to explain to me why they (distillers) need a tax break." For perhaps the first and last time, we agree with Stumbo.

Also noxious in the plan is a proposal to reduce state income tax exemptions on people with more than $80,000 of retirement income. The state already taxes retirement income above about $42,000. It just wants more from folks on the higher end. That would provide just one more reason for this desirable group of residents to bypass Kentucky's lakes and other retirement areas for states like Florida or Texas, which have no state income tax with which to plunder them.

Beshear said of his plan, "â ¦ I think it does what ultimately we want, and that is to have a modern tax code for Kentucky that will create revenues as the economy grows and will attract new jobs."

We have a little trouble with that last part, unless the governor means more state government jobs. Because what the program really does is raise taxes by $210 million a year. And it does it by expanding taxes to everything that moves.

That won't bring jobs to the commonwealth - not private sector jobs, anyway. It will do just the opposite. Kentucky has long had one of the lowest employment rates in the nation in terms of participation of working-age people in the workforce. Its unemployment rate in December was 8 percent, unchanged from a year ago and 1.3 percent above the national rate of 6.7 percent.

Kentucky's economy is dragging largely because its people and its businesses are taxed to the gills. The idea that an "overhaul" that raises net taxes another $210 million will create jobs and reverse this trend is pure fantasy.

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