Kentucky Club for Growth
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June 30, 2010

New Tax Makes Tanning Salons Hot

Bad pun?

The Bowling Green Daily News reports that local tanning bed owners are not happy with the first round of new health care taxes:

"Honestly, I think it's an exaggerated tax that's not going to help as much as they project it will - it's unnecessary," said Lindsey Mayo, manager of Solar Connection on Russellville Road. "Basically it targets small business owners and it's a specific type of small business owners. Most people who own tanning salons are women."

The salon is changing its account system. Workers are installing a special account for the tax and a way for the salon to send regular reports to the government. But, aside from those changes, Mayo said she does not expect the tax to hurt business.

"I really don't foresee it deterring people from tanning at all," she said. "It will be an extra tax that's unnecessary."

Other shop owners agree, saying they do not anticipate a big customer loss but feel they're being unjustly punished.

"I just think it's wrong - they shouldn't be taxing tanning beds," said Sandra Wood, co-owner of Tropical Tans in Scottsville. "Why this? Why not a haircut? Why not something else? They're targeting tanning beds in general."

William Neal, owner of Ultima Tan on Russellville Road, said he believes the tax might have a small impact on business, but customers will continue to flock to his salon because they use his beds for more than just tanning.

Tanning beds help ease pain associated with arthritis, certain skin conditions and sore muscles, he said.

"If they're going to put a tax on this, why don't they put a tax on physical therapy?"

June 29, 2010

Money-Grab in Stanford

Stanford, Kentucky is facing a $200,000 budget shortfall, and just voted 5-1 for a 92% payroll (income) tax increase. The tax increase is projected to net about $625,000.

Not only is the tax increase for an amount substantially more than the shortfall they seek to cover, the city expects events to cover the shortfall anyway:

They are hoping that residents in an area around Stanford Elementary School will vote in November to be annexed into the city. There are about 131 homes, a handful of businesses and about 300 people in the targeted area, and bringing them into the city would generate an estimated $200,000 in new property taxes and franchise fees.

...

The city could also save significant money with the retirement of two police officers. One is set call it quits at the end of the year and another is considering it. The officers might return to work part-time, keeping the department fully staffed but saving the city their full-time salaries and benefits, Miracle said.

Scotty Ernest, the only council member to oppose this blatant money grab, offered some come constructive recommendations for budget cuts, like the $10,000 raise the council had just given the mayor:

While others on the council suggested ways the city might be able to cut expenses, it was Ernst who pushed for slashing the budget instead of waiting to see if annexation and officer retirement might stave off the tax increase.

"If we have to cut, let's cut now," Ernst said.

But Ernst's motion to save $45,000 by doing away with the city's Main Street and tourism programs died for lack of a second. He said he saw no evidence that efforts to focus on the arts as a way to revive downtown is paying any dividends, especially since Sandy Swett, the driving force behind the arts program, is leaving soon.

...

Miracle argued that the new downtown direction is gaining momentum in the six months it has been in existence and needs more time to prove its worth. Ernst then took a shot at Miracle, whose pay will increase 50 percent to $30,000 a year in the new budget.

"You're the mayor getting the $10,000 raise -- you can take it over," Ernst said of the Main Street program.

How much do you expect that this tax increase is permanent, regardless of whether the annexation takes place? We give a gold star to Mr. Ernest for looking out for the taxpayer in Lincoln County.

June 28, 2010

"Tolls will be from $1 to $3" Each Way in Louisville

In 2009, we considered HB 102 (and its subsequent inclusion ans passage in the special session) as one of the six new taxes and tax increases passed that year. HB 102 set up a new infrastructure for putting tolls on Louisville's bridges. As we wrote at the time:

So far, the legislature has voted to hike the gas tax by four cents, bond an additional $400 million in debt to build roads, and that's all on top of an expected $441 million in federal stimulus road building. Now in addition to saddling drivers of the commonwealth with higher gas taxes and debt, they are trying to bring back tolls.

Even if one believes that tolls are a fairer way to apportion fees for use of the road system, that is no excuse for piling Kentuckians with multiple tax and spending schemes. They've already voted to hike taxes and pile debt above levels that were already at record highs. Apparently debt and tax hikes are not sufficient for those addicted to spending in Frankfort, and they need to create an entire new system of taxation on top of those measures.

The measure passed the House Now the real consequences of this vote are coming to light. The Kentuckiana Regional Planning Development Agency, the agency planning and coordinating the bridge project in Louisville, has been asked by the federal government to estimate the future tolls on the completed project.

How much will it cost to drive from Louisville to Indiana and back? $6

A rate of $3 per toll for a base toll rate -- which is the high end of the rates examined in the Wilbur-Smith study -- will be the initial figure that the bridges authority will use.

The rate of $3 for tolls are not necessarily the final rate that will be imposed on the bridges as Schultz said the bridges authority retains a lot of flexibility in the plan.

"For planning purposes ... we decided to use a conservative assumption for air quality purposes," he said. "And that conservative assumption is what causes the most traffic diversion, because tolling something creates traffic changes."

So, it may not actually be $3, but they wanted to pick a number that would deter enough drivers from traveling that the EPA would be satisfied.

You can thank the 67 members of the Kentucky House and 32 Senators who pushed this idea forward.

The Dangers of Expecting Gifts

One of the tricks our legislators used to balance the recent budget was an assumption that the federal government would find an additional few hundred million to give to the state's Medicaid program.

The federal spending bill has been delayed passage in Washington as the US Congress struggles to figure out how to pay for the massive new spending initiative/transfer to states.

Governor Beshear has no empathy for such questions about how can taxpayers possibly afford the new spending, however. He wants the gift from taxpayers and he wants it now!

Gov. Steve Beshear says the state could come up nearly $240 million short early next year if a federal spending bill defeated by a Senate Republican filibuster doesn't pass.

...

Beshear said that having to re-balance the budget to offset the loss of nearly $240 million would be a "horrendous" task. He said virtually every state program would face significant reductions.

Some out there in Kentucky's blogisphere are actually blaming Congress because of Kentucky's obviously faulty assumption that this spending was preordained. Instead, Congress is pursuing a bill that creates over $100 billion in additional deficit spending (as well as $40 million or so in new taxes), despite passing PAYGO rules and making other overtures to give the appearance of a commitment to reducing the deficit.

But Beshear doesn't care how the ransom is collected, so long as he gets his cash as doesn't have to face a 'horrendous' task.

June 24, 2010

Should Lawmakers Return Their Salaries for the Special Session?

Recently, it was reported that two lawmakers have returned the salary and expenses they received for the special session to the Kentucky Treasury:

Two Kentucky lawmakers have returned more than $2,500 to the state treasury, refusing to be paid for a weeklong special legislative session held last month.

...

Democratic state Reps. Jim Wayne of Louisville and Melvin Henley of Murray were the only ones out of 138 lawmakers who have returned their wages to the state treasury, according to documents obtained by The Associated Press through an open records request.

"I just feel like we should have gotten the budget done during the regular session," Henley said Wednesday. "I just felt like it wasn't right to take a salary for something we should have already done."

...

Wayne said lawmakers have a constitutional responsibility to pass a state budget every two years in a regular legislative session.

"We didn't get it done," he said. "I just thought it was the responsible thing to do, to write a check right back to the treasury."

Is this an act of responsibility or a political stunt?

If this were truly a heart-felt demonstration of fiscal responsibility to the taxpayer, we would assume such a philosophy would guide most of the voting activity of these two legislators, so let's examine that record.

Just looking at our 2009 Scorecard -- a non-election year -- we can see that each of these legislators cast eight votes in favor of new and higher taxes (HB 53 twice, HB 144, HB 236, HB 347 twice and HB 374). They also voted in favor of underfunding pensions (HB 117), and using new tax revenue for new spending (HB 143). Rep. Wayne even sponsored a bill to hike taxes on activities that would affect Kentuckians across the board (HB 223).

It's clear that concern for the taxpayer is a momentary revelation for these two.

The article online contained many adulatory comments, like:

"FINALLY!!! KUDOS!! Two legislatures that manned-up to job and did what was right for the right reasons! I only wish they were from my area but sadly weren't."

And

"REMEMBER THIS IN NOVEMBER!!!"

What we need to remember in November is that most of our legislators have horrible records in terms of fiscal restraint, and we shouldn't let trifling political stunts obscure that fact.

Credit Rating Agency Identifies Kentucky's Poor Budget Decisions

While we were away, the credit rating agency Fitch Ratings downgraded their assessment of Kentucky's ability to repay it's debt. A ratings downgrade has some self-fulfilling tendencies to it -- a lower rating can make new debt more expensive, meaning that it is harder to adjust future payments.

In the explanation for the downgrade, Fitch's offers a critique of Kentucky's budget. From mycn2:

Specifically, Fitch explained the rationale for downgrading Kentucky on several key points:

Depleted budget reserves

Continued reliance on debt restructuring to save money

The General Assembly making the assumption that Congress will extend the Medicaid reimbursement increase for another six months through June 30, 2011. If it doesn't Kentucky will have a $238 million hole in its spending plan.

Total debt levels -- roughly 6.8 percent of the state's revenue -- are "at the higher end" of its traditional range

Kentucky's economy "entered the recession later than its neighboring states and the national as a whole," which could cause revenue to continue to fall or stay stagnant.

These are the residual effects of bad budgets passed in 2007-2009, not the consequences of the most recent effort. It also identifies specific points for future improvement.

June 23, 2010

Frustration With Sen. Williams Will Get Sen. Denton Nowhere

There is much to be said about Senate President David Williams.

We have praised him for using his leadership to stop tax increases and control spending. We have criticized him when he has failed to do so.

He routinely scores in the middle of the Senate on our scorecards for two reasons. First, he generally protects the taxpayer through his control of the schedule -- bad bills aren't even considered and we have no vote to weigh in our scorecard. Second, he generally governs by the consensus of the Senate -- even the 'controversial' things he does allow through pass with 30 to 34 votes in favor. Both of these issues make the Senate difficult to score.

What is clear regardless of the policy he pursues is that he is the force of Frankfort. As Ryan Alessi recently pointed out, Greg Stumbo was elected Speaker in large part because his caucus felt that Jody Richards was unable to stand up to President Williams:

Knocking off an incumbent legislative leader - especially one at the top - is rare.

House Speaker Greg Stumbo achieved it in 2009 with a narrow victory over Jody Richards, who had the distinction of the longest-serving speaker.

In that case, Stumbo mounted a campaign about how Williams had gotten the better of House Democrats in budget negotiations and other legislation over the years.

This year, Stumbo was shown to be just as ineffective as Richards, as he stubbornly forced a special session of the Legislature to pass a budget, yet still got rolled by Williams.

Now we learn that Sen. Julie Denton is frustrated with Williams' effective control of the process and, in an act of comedy, has declared herself a candidate for Senate President.

If a Speaker with a super-majority in his own house of the legislature can't beat him, what chance does a single, frustrated legislator have?

We're Back. What Did We Miss?

We've been off for two weeks, so there' no shortage of things to write about.

The Governor vetoed portions of the budget, Senator Julie Denton is full of herself and Wall Street disapproves of Kentucky's budget.

That's just the beginning.

Check back this week as we keep you updated on the developments in Frankfort that will impact your pocketbook, and we'll also keep you updated on developments across the state that will impact the makeup of the 2011 General Assembly.

Thanks for reading.

June 1, 2010

The 2009-2010 Scorecard

For the Fourth Year, the Kentucky Club for Growth is proud to present our ultimate voter tool - our Legislative Scorecard. We have ranked Kentucky's legislators based on their votes on issues of fiscal responsibility and economic freedom.

Follow the links below to see how your legislators ranked. We have ranked the 2009 and 2010 Sessions together in our overall ranking so that you can see how they've voted cumulatively during the budget cycle (and the political cycle). To look at each year's ranking, you can view the individual vote tallies for each year. Additionally, you are encouraged to view the Scorecard Justifications to see the ridiculous, and sometimes good legislation that we score.

Please pass these tools along to your friends who are concerned about protecting the Kentucky taxpayer!

2009-2010 House Scorecard
2009-2010 Senate Scorecard

2009 Votes House | Senate
2010 Votes House | Senate

2009 Vote Explanations
2010 Vote Explanations

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The KY Club for Growth seeks principled candidates who are committed to the following:

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