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Income tax eradication osculating in Frankfort

November 25, 2008|Tyler Young

Two of Kentucky's state representatives are sponsoring a bill for the upcoming General Assembly that would abolish the state's income tax and lower the sales tax from 6 percent to 5 percent.

Rep. Bill Farmer, R-Lexington, and Rep. Stan Lee, R-Lexington, filed a bill to amend KRS 139.010 to eliminate the tax on income for all Kentucky workers, a practice that has been adopted in nine other states - Alaska, Florida, Nevada, New Hampshire, North Dakota, Tennessee, Texas, Washington and Wyoming. To offset the lost revenue from the income tax, the bill would extend the 5-percent sales tax to areas that were not previously taxed, such as services and commercial real estate. According to Farmer, that 5 percent will be enough to fund the Kentucky budget.

The thought behind getting rid of the tax is that more money will go directly into the pockets of citizens.

"When you call the plumber every 18 to 24 months, you are going to have to pay five cents on the dollar for what the plumber does for you which you are not paying right now," Farmer said. "But if you are decent at controlling your money, you will have the money to do it with because you won't have the money coming out of your paycheck that was going to the state of Kentucky."

Farmer said he also hopes to attract more business to Kentucky.

"I think it will entice bigger businesses to look at Kentucky as a place to work," he said. "Right now, one of the things we're looking at is taxing commercial rental real estate. The way to get around that particular tax is to make an investment in Kentucky - build your office building here. If you own your office, you don't pay that rent. But if you own that office, you have an investment in Kentucky - you're committed to it."

Critics of this type of tax reform contend that abolishing the income tax adversely affects people in the lower income level while giving tax breaks to people in the upper bracket. The income tax, in theory, taxes people on ability to pay because the money comes directly from the paycheck, not the bank account.

"Any time you replace an income tax with a sales tax, it's a transfer of taxes to working people away from professionals," Rep. Bob Damron, D-Nicholasville, said. "What we've done in Kentucky is we've tried to exempt things like food and medicine from sales taxes to try and help the working poor in Kentucky that have to pay for those services. It's the same way with we've got certain exemptions for farmers on buying feed and fertilizer and those sorts of things."

The bill would not tax food or certain medicines.

Farmer maintained, however, that his bill will give a boost to Kentucky's economy.

"Kentucky needs a new direction to go," he said. "This is a serious new direction. We need to look at this. We're putting Band-Aids on a broken system. It's time to stop putting Band-Aids on it and try something new."

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