The Problem With Tax Incentives
The abrupt ending of the session this year brought the pleasant death of two unwanted bills.
The first would have added a second driving tax to Kentuckians, adding tolls to tax drivers (HB 102) in addition to the gas tax hike (HB 374) the general assembly did pass.
The other was HB 229, a collection of tax incentives and credits for training and hiring workers, capital investment and reinvestment, agribusiness startups, technology industry headquarters location, locating in certain counties, partnership with state universities, prolonging existing credits that are set to expire, rehabilitation of historic structures, IT startups, lodging facilities, theme restaurants, and Hollywood films.
It's a ridiculous list, and its length points to the fundamental problems with tax credits:
- They pick winners and losers. If you're on this list, Kentucky's tax code doesn't apply to you. If you're not on this list, you are at a disadvantage to anyone who is and is not burdened to support the ridiculous spending of our government.
- This incredibly long list is a blatant admission that Kentucky's tax system is burdensome to job creation. If your legislators think such a long list of exemptions is necessary to attract businesses to Kentucky, they should also realize the corollary idea that Kentucky's tax system is currently unattractive to new business: if our tax system worked, they wouldn't be working so hard to change it for their favorites in the name of economic development.
The end result of passing such a bill is this: the legislature would be admitting the tax code is broken but only fixing it for those with good lobbyists.
Unfortunately, that's too often how Frankfort works.
