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Ky. revenue plan clears House committee

FRANKFORT, Ky. (AP) - A divided Kentucky House committee
approved a tax package Wednesday evening that's aimed at raising
more than $300 million in new revenue over two years to help plug a
massive shored Kentucky House committee
approved a tax package Wednesday evening that's aimed at raising
more than $300 million in new revenue over two years to help plug a
massive shortfall confronting lawmakers in balancing the state's
next budget.
Supporters on the panel said the proposal would generate money
needed to help avoid deep spending cuts in education and human
services. Some opponents worried the tax code changes would inflict
pain on businesses struggling to emerge from the deep economic
downturn.tfall confronting lawmakers in balancing the state's
next budget.
Supporters on the panel said the proposal would generate money
needed to help avoid deep spending cuts in education and human
services. Some opponents worried the tax code changes would inflict
pain on businesses struggling to emerge from the deep economic
downturn.
Two big-ticket items in the plan would temporarily suspend tax
write-offs for businesses reporting losses and would speed up sales
tax collections. Those two provisions alone would account for more
than half the additional revenue in the next two years.
The proposal would not raise tax rates.
Lawmakers are trying to plug a shortfall exceeding $1 billion
for the next two-year state budget cycle, which begins July 1. The
shortfall was caused by the steep economic downturn.
The tax proposal cleared the Appropriations and Revenue
Committee on a 17-11 vote. Every Democrat supported the tax plan
except for Rep. Jim Wayne of Louisville. Committee Republicans
voted in unison against the bill. Wayne said Tuesday the tax plan
lacked vision.
Rep. Harry Moberly, D-Richmond, said the tax changes would cause
little pain and were necessary "in this time of sacrifice to allow
this state to continue to move forward."
"We're going to be able to escape this biennium with minimum
pain to education and human services if we have the revenue that's
available in this bill," Moberly said.
Rep. Danny Ford, R-Mount Vernon, worried about temporarily
suspending tax write-offs for businesses reporting losses. The
proposal has drawn concern from business interests.
"We've been in an economic downturn ... and we're beginning to
see some daylight," Ford said. "Are we not doing damage to the
folks that maybe are starting to come out?"
That proposal would be in effect during the next biennium. It
would generate an estimated $72 million in the first year of the
next budget cycle and $90 million in the second year. Affected
businesses would still be able to eventually claim those losses for
tax purposes.
Rep. Bob DeWeese, R-Louisville, said he was worried the revenue
plan was being put "on the backs of businesses."
The accelerated sales tax collection proposal would generate an
estimated $90 million.
Committee Chairman Rick Rand, D-Bedford, said budget drafters
had "looked under every rock" to find ways to balance the budget,
and "the last place we went was to business."
House leaders met with business representatives earlier
Wednesday and asked them to offer alternatives to the tax changes
to help balance the budget, he said.
"I'm a little bit disappointed that they haven't come to us
with any solutions," Rand said.
House leaders did offer one concession to the business
representatives.
Rand said the House budget bill would include language to
restore the tax write-off provision in the second year of the
budget cycle if state revenue collections improve.
Bryan Sunderland, with the Kentucky Chamber of Commerce, labeled
the meeting as productive, but said chamber members were concerned
the two big-ticket tax items would represent well over $200 million
in "working capital for Kentucky employers."
"We are looking for a constructive dialogue to try to prevent
those changes from going into effect," Sunderland said in an
interview.
Other tax provisions included in the bill would cap tax credits
for the film industry and new home buyers, moves that are projected
to save the state nearly $21 million in the biennium.
Rand said the revenue package would allow budget writers to
finalize their spending plan.
"We can't do it on a wish," he said. "We have to know that
this revenue is going to be there. And so this is a key
component."
The House leadership budget plan appears to rely on a
combination of targeted spending cuts, tax code changes and other
steps as its drafters look for a balanced budget.
House leaders have indicated the spending plan calls for
reductions in government contracts and non-merit positions across
state government. House leaders have also talked of revising state
health insurance offerings as a cost saver for the state.
Another proposal would eliminate two instructional days in
Kentucky public schools, which is projected to save about $34
million each year.
The Senate will get its crack at the budget once the plan clears
the House.
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The legislation is House Bill 530.

(Copyright 2010 by The Associated Press. All Rights Reserved.)


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