February 8, 2006

        Representatives of the Kentucky Economic Justice Alliance joined Rep. Jim Wayne in urging House members to adopt tax code reforms that would raise revenue while adding a measure of fairness.

        “This is not radical legislation. In fact it’s not radical enough,” said Rep. Wayne before the House Appropriations and Revenue Committee on February 7. “What I’m proposing is reasonable and modest. This legislation moves our tax system in the right direction, in the direction of greater fairness.”

        Wayne’s bill, House Bill 506, has four major provisions backed by KFTC and the Kentucky Economic Justice Alliance. It would: 1) keep Kentucky’s estate tax by decoupling it from the federal tax code; 2) established an Earned Income Tax Credit (EITC) to help low-income working families; 3) establish two new individual income tax brackets of 7 percent and 8 percent for upper incomes; and, 4) extend the sales tax to selected services.

        The legislation would raise nearly $200 million in new revenue.

        That’s revenue desperately needed to help keep Kentucky moving in the right direction, said KFTC member K.A. Owens.

        “You folks track the numbers. You know what’s going up and what’s going down,” Owens testified. “After years of budget cuts and chronic under-funding of public programs, Kentucky is in danger of sliding backwards.”

        He pointed out that Kentucky now ranks 50th in per capita spending on education, according to Governing magazine. College tuition rose 33 percent in five years while state higher education funding per student fell by 8 percent. The poverty rate increased faster in Kentucky than in all but one other state between 2003 and 2004. And the state fell five spots last year to 42nd in overall child well-being, while unemployment rose in 117 out of 120 counties.

        “These facts are not new. Yet many lawmakers are avoiding the hard truth that your work to reform Kentucky’s tax system is far from complete,” Owens said.

        That was a point Steve Boyce also emphasized.

        “I felt moved to speak with you after talking with a legislator last week who asked, ‘Didn’t we take care of low-income taxpayers last year?’” Boyce told committee members. “I would hope to address any confusion on that point. The answer is clearly ‘no.’ Some good things did happen, but Kentucky’s overall tax structure remains regressive.”

        Boyce held up a chart showing tax payments by various income levels and said, “This is a picture you should all think of as something that needs to be addressed.” He stressed the EITC, estate tax and income tax provisions of the bill as ways to make the system more fair.

        “I started paying attention to taxes when I got involved with Habitat for Humanity,” added Bill Stolte. “I realized that Habitat families, who are working poor, pay more in state income tax than I do. My wife and I may have a six-figure income, but we each receive senior citizen exemptions worth nearly $90,000. And we get a reduction on our property tax. What’s fair about that? This is a call for justice.

        “I urge you to pay close attention to parts of this bill that merit more than just discussion,” urged Stolte. “The estate tax is on a path to be phased out with the federal tax, and Kentucky will lose $50 million a year. Don’t just talk about that. Act on it. Stem the tide.”

        Kentucky Youth Advocates’ policy director Deb Miller reminded committee members that, “The Earned Income Tax Credit is widely recognized as the number one poverty fighter at the federal level.”

        She explained that a 15 percent refundable state EITC would direct $82 million back into local communities across Kentucky. “That is money that is spent locally.

        “Our poverty numbers, like the nation’s, improved during the 1990s. Since the change of the century we’ve been headed in the wrong direction,” Miller added in response to a question about child poverty from Rep. Harry Moberly. “Child poverty is on the rise in Kentucky and nationally. Today in Kentucky, 23 percent of our children live in poverty, and fully half live below 200 percent of the federal poverty line.”

        Comments from legislators were supportive.

        “Your bill is well thought out,” Rep. Moberly told Rep. Wayne.

        “Rep. Wayne is the conscience of the General Assembly,” Moberly reminded committee members. “I think it is a disgrace that we have so many children living in poverty. And even with an economic recovery, we do not have enough revenue to meet the needs of the Commonwealth.”

        “I too applaud your bringing these facts and this proposal to the General Assembly,” added Rep. Jimmie Lee. “We are fast reaching a crisis point. The train is heading over the cliff.

        “I chair the budget subcommittee for health and human services. Right now I have $65 million in requests just to continue existing services,” continued Lee. “We have increasing numbers of people needing services, and I don’t have the money to work with. We are going to have to decide very soon if we are going to act before the train goes off the track.”

        “Some of us have been more fortunate than others,” said Rep. Lonnie Napier. “I can afford to pay a little more. What’s wrong with that when we have state employees who are not paid enough to support their families?”

        “I don’t know how much longer we as a legislative body will sit here and talk about the budget being in the toilet,” Rep. Mary Lou Marzian contributed. “I’m prepared to vote on this bill today. We can take some bold steps and do something positive. It is time. The train has left. Be brave. Be courageous. Pass legislation that can help Kentucky families.”

        However, the committee did not vote on the bill and one was not expected.

        KEJA is encouraging lawmakers to make the provisions of HB 506 a part of the House budget. Moberly said the committee will be working on the budget through the month of February.