The $55 million budget hole for this fiscal year was caused by dwindling tax receipts. In addition to being caused by larger economic problems nationwide, dwindling tax receipts are caused by the fact that Kentucky has done nothing to improve its ailing business climate or the economic vitality of its working citizens. Tax reform should have been the number one goal of a special session in the midst of an economic crisis.
The sad thing is that our legislature had a chance. Rep. Bill Farmer put forth H.B. 51, which would have eliminated the income tax in Kentucky for individuals and businesses. It would have put a sales tax on services that are not currently taxed (making the tax code more fair), but it would have actually lowered the current sales tax to 5.85 percent.
That would mean an extra $2,500 in the pocket of someone making $50,000 per year. That's real money.
Missing an opportunity
The legislature was too busy cooking the books and buying votes to take notice of this awesome opportunity, which would not only have allowed Kentuckians to keep more of their own money, but would have given the entire state, and every business in it, a distinct advantage over all of the surrounding states.
This shortsighted failure kept Kentucky from becoming a destination for businesses and individuals who will participate in the coming tax revolt.
If Obama's health care overhaul passes, not only will we have Canadian-style "wait in line" medicine, but some states will reach a top marginal tax rate of 57 percent (Kentucky's will be 54.85 percent if nothing changes). I know some folks love the idea of taxing the rich, but let me ask you this. Who creates the jobs?
The natural flow of cash is to the follow the path of least resistance. Had Kentucky eliminated its income tax on individuals and businesses in the special session, lawmakers would have instantly transformed Kentucky into one of the states with the lowest overall tax burden, and Gov. Beshear could have been waiting at the state line with open arms and a bucket of fried chicken to welcome all of the new businesses and jobs coming into the state.
Instead, we'll be waiting at the border for another reason - to accept the next federal bailout - because that's where this is headed.
As citizens, let's make sure this doesn't happen again in the next regular session in January, and the next election cycle in 2010.
Leland Conway is the executive editor and co-founder of www.conservativeedge.com and the host of the Pulse of Lexington on News Radio 630 WLAP.