The State's Spending Problem
Our editorial was published in Business Lexington today:
Reform should focus on spending
by Andy HightowerLexington, KY - In the General Assembly, in editorial boards and among advocacy groups in Kentucky, a budget crisis has created renewed interest in reforming Kentucky's tax code. Many have grown tired of repeated claims of billion-dollar shortfalls in the state budget and have pushed the term "tax reform" as a new name for raising taxes in Kentucky.
There are many good reasons for a new approach to taxation in Kentucky:
• Kentucky is a high-tax state.
• Kentucky's tax base is shrinking.
• The tax code is riddled with exemptions.
• The tax code is particularly unattractive to job creation.
But the idea being pushed by many -- that the tax code should be reformed to support expanded spending in Frankfort -- is simply wrong.
First, we need to separate the idea of "tax reform" from the budget problem currently being discussed in Frankfort.
The budget problem is a spending problem
The shortfalls discussed in Frankfort are not the result of some great fluctuation in revenues. While revenues have declined over the last two years, revenues over the last five years have stayed within 2.5 percent of an $8.45 billion average.
The "billion dollar shortfall" is only a result of chronic overspending. Over the same five years, spending has averaged just under $8.8 billion -- a discrepancy that averages out to $350 million (4 percent) annually.
The "billion dollar shortfall" is not a statement that revenues have decreased by $1 billion; it is only a statement that elected officials would like to spend $1 billion more than they have available.
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