Kentucky Club for Growth
fighting and winning for economic freedom

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January 31, 2011

Watch the Kentucky Club for Growth on KET Tonight

Tonight at 8PM Eastern, Executive Director Andy Hightower will appear on Kentucky Tonight to discuss Kentucky's tax system along with Representative Bill Farmer, Representative Jim Wayne and Terry Brooks of Kentucky Youth Advocates.

To view additional showtimes or to watch online, click here.

January 26, 2011

Rep. Bill Farmer Explains His Tax Reform Bill

In response to an uninformed article on his tax plan, Rep. Bill Farmer has penned an op-ed on his tax reform proposal HB 196.

BY: Representative Bill Farmer, R-Lexington (88th District)

Recently I read a column published in the January 19th edition of the Anderson News ("Meet the Man Who Wants to Raise Your Taxes"), and I felt compelled to respond and set the record straight. Please note that I submitted this column to the publisher of the Anderson News, but for whatever reason chose not to print it.

The goal of House Bill 196, which I have sponsored for the third consecutive year, is the elimination of our state income tax. From a business standpoint, we remain at a distinct disadvantage to our neighboring states that have a more friendly tax structure which includes no state income tax.

A prime example would be our neighbor to the south, Tennessee. In 1980, the disparity in per capita income of Kentucky and Tennessee was just 0.1 percent. At this time, state and local taxes as a percentage of personal income were about 10% higher in our state, with the critical difference being that Kentucky levied a personal income tax, and Tennessee did not.

Fast-forward to 1996 when taxes per $1,000 in personal income were $117.29 in Kentucky, but only $90.42 in Tennessee. By 1998, the income disparity had grown 129-fold to $2,064. It currently takes the typical Kentuckian 13 months to make the income that a resident of Tennessee makes in a year thanks to Kentucky's personal income tax.

By eliminating the income tax, we could also streamline government through the collection of one tax instead of the current three taxes. It would also give taxpayers control over when and where their taxes are paid. Most importantly, especially in this fiscal environment, it would allow for more of your money to remain in your pocket. A family of four with a median income of $37,000 would save an additional $1,911 annually.

This opinion piece additionally failed to mention that while a tax will be implemented on specified services and commercial real estate, this move will allow for food, housing and healthcare to remain untaxed. House Bill 196 would broaden the tax base while reducing the tax burden.

As an Enrolled Agent who has dealt with Kentucky's tax system for nearly 25 years, I've seen firsthand the burden our current tax system places on our people and our business community.

While I don't expect everyone to agree with me, I do find it troubling that the writer of the column failed in his duty as a journalist to completely research and report all facts pertaining to House Bill 196.

The writer is correct in that I do not represent the people of Anderson County. But in my opinion I represent all of the people of Kentucky, both those inside and outside my district. I certainly welcome any input, questions and concerns regarding my efforts to end our state income tax and modernize Kentucky's tax code.

Please contact me personally at my office, (859) 272-1425, or send me an e-mail at Bill@htitax.com. I welcome the opportunity to clear up any confusion about HB 196.

January 25, 2011

Holsclaw Starts Off on Wrong Foot

While we're on the subject, prior to her filing today, Republican candidate for Governor Bobbie Holsclaw spoke once again with reporter Ryan Alessi.

In her November interview, she demonstrated that she needed to continue to develop her ideas about what sort of direction and leadership she was proposing to provide Kentucky.

Mr. Alessi provided her 10 minutes of his time and repeatedly asked her to explain why she wanted to be governor or why she felt current candidates fell short.

First, she refused to contrast herself with David Williams saying that the press would examine his shortcomings. Next, asked by Alessi what problems Williams had not solved as Senate President, she again demurred and offered only:

"David is a legislator, I'm an administrator...I think that [Kentucky] needs someone who knows how to get in there and work for the citizens, and get down and do the job that needs to be done."

This time she explained some of her ideas, and they aren't good ones.

She said Sunday night that she will make jobs and education key issues. But she said she also will push for a constitutional amendment to allow expanded gambling, such as slot machines, in Kentucky because she said Kentuckians will be forced to choose between higher taxes or additional state revenue from gambling.

"I want to see it put on the ballot," she said of a constitutional amendment. "I would tell the voters they're going to have a choice: What's it going to be, have someone raise the taxes or allow gambling."

She said Kentuckians already gamble through the lottery, bingo and at horse tracks, and the state needs more money.

"Kentucky is hurting for money," she said. "We're going to bankrupt."

Calling for more government revenue isn't a conservative position. State leaders need to cut spending and live within their available means. In fact, Holsclaw's priority of more state revenue puts her to the left of just about all the candidates running, including Governor Beshear who has (eventually occasionally) recognized the need to reduce spending and debt.

At PageOneKentucky.com, Jake reports that Holsclaw has a history of being on the wrong side of Kentucky's Republican electorate.

Bobbie Holsclaw may be touting her "proven record" against partisan politics. But the last real political thing she did was publicly endorse John McCain in 2000 after George W. Bush had already been selected. And then, of course, her top political guy backed Steve Nunn for governor. Not exactly what I'd call two big wins.

A historical trend we expect to continue.

Holsclaw Files For Governor, Moffett Says It Will Hurt Him

Bobbie Holsclaw plans to officially file to run for the Republican nomination for Kentucky Governor, and candidate Phil Moffett has already responded.

From a press release:

"No one ever said dismantling the political ruling class in Kentucky would be easy," Moffett said. "Splitting up the anti-David Williams vote isn't the way I would have hoped for this to go, but as voters learn his role in driving the state toward bankruptcy while expanding his own pension, there will be plenty of those voters to go around. Then it's a race based on who has the best ideas. May the best candidate win."

As Pageoneky.com points out, it's unusual for a candidate to note the negative political impact of another candidate joining the race.

Moffett also notes that he hopes it to be a race based on ideas. We have yet to hear any from Holsclaw.

Today Is the Filing Deadline

Besides Hosclaw, we haven't heard of anyone else who plans to file. But it seems that there are always some deadline filers. Join us on Facebook and follow us on Twitter and we'll report the latest happenings.

January 24, 2011

States Versus Obamacare

Heritage.org describes how states have joined the battle against Obamacare.

So far, 27 states have filed suit against the new law's individual mandate and requirements forbidding states from reducing eligibility for their Medicaid programs. But the legal battle isn't the only way states can throw a wrench in the health care overhaul. This week, the American Legislative Exchange Council (ALEC) debuts "The State Legislators Guide to Repealing Obamacare" highlighting ways in which states can continue the battle.

States face some of the most detrimental effects of the new health law. Obamacare significantly expands eligibility for Medicaid, and though the federal government will foot the bill in the first years of its enactment, in the end states still will be left picking up a portion of the cost.

ALEC's guide is important in Kentucky, because our Attorney General is concerned more with uncovering the truth about Aqua Buddha than joining in the fight to repeal this unconstitutional legislation. Let's encourage Kentucky's legislators to take up the cause.

Gatewood Gailbraith's Tax Plan -- Reward Certain Populations

Gatewood's tax reform plan is the most complex. He offers in interest in lowering taxes, expanding the sales tax, and lowering taxes for certain constituencies.

He recognizes the importance of reducing spending...

The Galbraith/Riley tax plan seeks a reduction in many taxes, but no plan will defeat these problems or provide enough income if wasteful overspending continues to dominate Kentucky's state budget.

...and the failure of targeted tax incentives.

A hodgepodge collection of ad-hoc tax incentives to attract individual businesses have resulted in inconsistencies in Kentucky's current model of economic development and have relieved large corporate entities of paying their fair share of the budget.

They have created an inequitable system prone to influence peddling, often forcing businesses to compete for favor. In addition, existing small businesses are overloaded with taxes, stifling growth and limiting employee hiring. The system is unfair and burdens Kentucky's bread and butter -- small businesses.

Yet it isn't entirely clear what he's proposing.

He proposes expanding the sales tax to include services, in exchange for an elimination of income taxes...

Much of this can only be done if we finally implement a service tax in addition to our sales tax.

We believe an equitable tax on services could possibly eliminate the state income tax, reduce the tax on small businesses, and still provide the money needed to operate the state at an acceptable level.

...but seems to contradict his opposition to "inconsistencies" in the tax code by proposing more carve-outs to his preferred political constituencies.

There is a long list of folks we would like to ease the burden on, including seniors over age 65 who make less than $30,000 per year, homeowners and parents with children in college, to name a few. But we won't know precisely who and how until we get into office.

Finally, like Williams, he proposes a panel of experts.

Then my administration will appoint a panel of experts to write the necessary language to get the job done. This will not be another commission to study the problem. The charge to this panel will be "get the job done."

January 21, 2011

David Williams' Tax Reform Plan -- Create a Commission

We've already written about Sen. Williams tax proposal:

The sponsors of SB 1, David Williams and Bob Leeper, should be commended for their leadership in creating this novel approach to attempt real reform. As Williams notes in a Herald-Leader report:

Williams said Beshear and the Democratic-controlled House, where a tax bill must originate, have not taken the lead on the issue. This bill would allow the Senate to push for tax reform.

Additionally, the instructions to the task force laid out in the bill are sound:

  • Focus on the creation of jobs and enhancement of production capacity;
  • Examine the tax and revenue structure based on its adequacy, equity, sustainability, predictability, and efficiency;
  • Focus on the impact of the tax and revenue structure on the competitiveness of the Commonwealth and our ability to attract businesses and individuals to locate, live, work, and invest in the Commonwealth; and
  • Place an emphasis on making the Commonwealth a low-taxed state;

That's a fair prescription for a more pro-growth tax code.

Williams proposal creates a mechanism to prompt action on the plan crafted by the panel:

After the plan is written by the expert panel, it would go to the state House of Representatives for an up-or-down vote without amendment. This ensures the special interests and lobbyists don't hack up a plan that could put Kentucky on the path to prosperity. If the plan passed the House -- where all matters of taxation must originate according to our state constitution -- it would then go to the Senate for an up-or-down vote, again without amendment.

Williams is also the only plan put forward that doesn't limit the scope to state taxes, but includes local taxation issues as well. This is important because it is Kentucky's local income taxes that make Kentucky one of the highest income-tax states in the country.

We have concerns about Williams' plan, however.

Our only concern lies in the makeup of the task force. Five university economists, two CPAs, one PVA, and a tax attorney. While the task force is instructed to solicit advice from business associations, the associations and their advice are hardly adequate substitutes to the input real job creators should have. Kentucky business owners should be a part of the team, not simply offer advice through association lobbyists.

Regardless, the truth of Williams' assessment of the process is indisputable.

Today, Frankfort is full of people who lack the appetite to tackle such a major issue. House Speaker Greg Stumbo says his chamber lacks political consensus to change the tax code. Beshear, as he does on most issues, lacks the courage to tackle such a tough problem.

Beshear needs to lead, follow or get out of the way on this critical issue.

To the naysayers and to the heads-in-the-sand crowd, I say that it is better to light one candle than to curse the darkness. We've spent decades cursing the darkness. It is time for leadership.

Steve Beshear's Tax Reform Plan -- Do Nothing

Governor Steve Beshear's editorial proposed nothing.

Instead, he laid out some principles and claimed accomplishments. Let's examine a few.

My position on taxes is clear and concise, strong and unwavering:

I do not and will not support any significant broad-based tax increase, not in these difficult economic times.

Our families and businesses do not need a heavier burden as they struggle to not only survive but also to lay the foundation for future success.

While he can possibly claim to oppose broad-based tax increases, he has certainly created his share of tax increases during his term in office. Here's a list of some of them:

  • A 2% tax on wages in 'developmental areas' (RS08 HB 611)
  • A restaurant tax in Appalachia (RS08 HB 635)
  • Requiring titling for ATVs (RS09 HB 53)
  • Tobacco Tax increase (RS09 HB 144)
  • Creating a sales tax on alcohol (RS09 HB 144)
  • Tax on IPTV (RS09 HB 236)
  • Creating a digital property tax (RS09 HB 347)
  • Gas tax hike (RS09 HB 374)
  • New authority to impose tolls (ES09 HB 3)

He goes on to explain that tax reform is too confusing a subject to consider right now.

There's lots of talk these days about tax reform.

However, if you ask 10 people what that phrase means, you will get 10 different answers. I am always open to ideas about how to make our tax laws more fair and more in tune with Kentucky's economy, but during this historic economic recession no such reform should include broad-based tax increases on Kentucky's families and businesses.

Then he claims credit for improving Kentucky's competitiveness:

In October, the national Tax Foundation ranked Kentucky's business tax climate 19th best in the nation, up an incredible 15 spots since 2009. We're ahead of neighbors Illinois, Ohio, Tennessee and West Virginia.

We can be proud of that ranking. More importantly, it shows independent approval of the strategic and sound approaches we've taken to date to address our revenue problems, approaches that have been carefully implemented to limit future damage to our economy.

It is true that Kentucky has improved its standing relative to other states, and it's because Kentucky chose not to substantially raise taxes during these years of fiscal challenges. But it's unclear that the Governor deserves any credit. The Democratically-controlled House attempted to balance the budget by passing a total of more than $322 million in tax increases during the time, all of which were killed in the Senate.

Similarly, he claims credit for attracting jobs by creating ridiculous incentives, like taxpayer giveaways to Hollywood production companies. Instead, the credit is more likely due to the decision not to raise taxes substantially over the last few years, for which the Senate deserves much of the credit.

January 20, 2011

Worth Watching: Ryan Explains the Cost of Obamacare

From Redstate.com

January 19, 2011

Phil Moffett's Tax Reform Plan -- Simplify

Of the tax plans presented by the four major candidates for governor, Republican Phil Moffett's is perhaps the simplest:

I will replace all 240 state taxes, fees and surcharges with a single-rate, consumer sales tax on all goods and services at the retail level. The goal is to be "revenue neutral," keeping tax receipts as close as possible to current levels. I believe this rate can be held very near our current sales tax rate of 6 percent.

Flat, fair and simple.

What do the details of such an approach really mean? It means more transparency in the tax code -- when you make a transaction consuming a good or service, 6% of its price is added on and goes to fund government. While this is most obvious when buying something at the store, it also means state taxes on cable and cellphones are eliminated and replaced with a 6% tax.

Currently, the state charges an excise tax on cable. On our latest bill is was 2.8% of out total. So the 6% sales tax would be an increase -- a trade off with the repeal of income and state property taxes.

Moffett describes the tax as a retail-level tax, so he expects to avoid taxing business-to-business transactions.

Additionally, he only describes his plan as replacing state taxes, so local property and excise taxes would remain.

Moffett goes on to describe a few fringe benefits of his approach:

What does this mean for state government? Currently, sales taxes are efficiently collected with an Internet-based system. The state revenue department can be streamlined when millions of individuals and businesses no longer file tax returns. Sales tax projections are more reliable than other forms of taxation, including income taxes.

Simply put, it will be the single largest transfer of power from state government to "we the people" since our commonwealth was established. This reform plan hinders the efforts of lobbyists and legislators to take money from us and spread it around to extend their political careers.

Indeed, if there are no longer tax credits and exemptions to carve-out, the throngs of lobbyists will be reduced.

And a simple, transparent and low tax system is always attractive to job creation.

January 18, 2011

Some Indecisive Man Files to Primary Incumbent Treasurer

We received an alert from the Secretary of State's website that Steve Hamrick has filed to challenge treasurer Todd Hollenback for the Democratic nomination for treasurer.

According to the Underground Rooster, Hamrick has the sort of long and varied resume that leads one to wonder why it is so long and varied.

Hamrick's background includes serving as the first County Planner for Marshall County Judge Mike Miller and later working at the Purchase Area Development District. Hamrick also worked for WCBL radio in Benton and served on the broadcast team for Marshall County Football. As a lead developer, Hamrick was instrumental in helping start the Purchase Training Center. During the Brown Administration, he served as Program Development Director for the Kentucky Private Industries Council. Marion County would select Steve Hamrick to serve as its first industrial & economic development director and he would also later be chosen as the first economic development director for Hopkinsville & Christian County. Hamrick's resume also includes having worked for the Kentucky State Park System. Steve father, the late Bill Hamrick, served as the first Superintendent of Ken-Lake State Park and the golf course is named in his honor.

As a former Executive Director of Capital Expo,...

Hamrick's political involvement covers 5 decades which includes serving in the campaigns of Grady Stumbo and former Governor John Y. Brown. Hamrick lost a close race to Tom Barlow in 1992 as the Republican nominee for Congress in the First District. Losing in 1994 to the eventual winner Ed Whitfield, Hamrick would serve as a State Co-Chairman of Republicans for Paul Patton for Governor Campaign. Hamrick switched back to the Democratic Party in the mid 90's. Although he has served on the Democratic County Executive Committees in Graves, Christian, Marshall and Franklin counties he said he expects some to be critical of him for having once been a republican.

That about covers all the bases...

Candidates for Governor Propose Tax Changes

In somewhat of an innovation, the Lexington Herald-Leader allowed each of the four major candidates for Governor to describe the changes they support to make the Kentucky tax system more competitive. We'll provide analysis over a few posts today, but here are the articles if you would like to begin reviewing them yourself.

Phil Moffett -- Replace Kentucky's 20 taxes with a single, flat sales tax

Steve Beshear -- Do nothing

David Williams -- Create a panel of economists to reform the code

Gatewood Galbraith -- Lower taxes, expand sales taxes and create new targeted breaks

Analysis to follow.

January 13, 2011

Moffett Identifies One Big Hole in Williams Agenda

In order to aid his gubernatorial ambitions, David Williams recently released (and passed through the Senate) a solid agenda for Kentucky. It addresses many of Kentucky's top needs, including tax reform, pension reform, and school choice. That really covers the bases -- except one.

Today, his primary opponent, Phill Moffett, called him out for this omission.

In a legislative session full of symbolic proposals, it's worth noting Senate President David Williams didn't even try to address Kentucky's job-killing labor union abuses, Republican gubernatorial candidate Phil Moffett said.

"Williams has been very weak on issues like prevailing wage repeal and making Kentucky a right to work state, letting multiple bills die in the Senate without a fair hearing," Moffett said. "Overpaying for state construction projects and scaring off employers to benefit our ruling class of politicians is a luxury we can no longer afford."

"Indiana, Wisconsin and Missouri are seriously considering becoming right-to-work states," Moffett said. "If they beat us to the punch and get any of the companies leaving Illinois, the blame falls squarely on Beshear and Williams."

It's time our leaders got over their fear of union's ability to bus in members from other states, gave Kentucky workers the right of non-membership in a union and repealed job-killing fantasy wage equirements.

Maryland Loses as Tax Laboratory

Maryland keeps losing out as a laboratory for innovative new liberal government revenue schemes.

First, they imposed a "millionaires tax" that ran wealth right out of the state:

Maryland couldn't balance its budget last year, so the state tried to close the shortfall by fleecing the wealthy. Politicians in Annapolis created a millionaire tax bracket, raising the top marginal income-tax rate to 6.25%. And because cities such as Baltimore and Bethesda also impose income taxes, the state-local tax rate can go as high as 9.45%. Governor Martin O'Malley, a dedicated class warrior, declared that these richest 0.3% of filers were "willing and able to pay their fair share." The Baltimore Sun predicted the rich would "grin and bear it."

One year later, nobody's grinning. One-third of the millionaires have disappeared from Maryland tax rolls. In 2008 roughly 3,000 million-dollar income tax returns were filed by the end of April. This year there were 2,000, which the state comptroller's office concedes is a "substantial decline." On those missing returns, the government collects 6.25% of nothing. Instead of the state coffers gaining the extra $106 million the politicians predicted, millionaires paid $100 million less in taxes than they did last year -- even at higher rates.

Next, the expansion of gambling to include slot machines is killing the horse racing industry in the home of the Preakness:

The Maryland Jockey Club fought back. It bankrolled a citizens' group that wants to stop slots at Arundel Mills, got enough signatures to put a county-wide referendum on the ballot and spent millions of dollars in a bitter fight against the Cordish proposal. But voters backed the Arundel Mills facility by a decisive 56 percent-to-44 percent margin. "The demand for jobs and the need for revenue in the state were [the voters'] priority," said a dejected Tom Chuckas, president of the Maryland Jockey Club. He said the company already prepared its worst-case contingency plan, which it will present to the state racing commission in November. It calls for a closure of Laurel, whose last scheduled racing date is Dec. 18, and a Pimlico season lasting approximately 40 days.

Now, a tax imposed on soda cans in Baltimore is leading to the loss of a plant and 77 jobs:

Last year, the Baltimore city council passed a 2-cent tax on bottled beverages. This week, Pepsi decided to cease manufacturing at its Baltimore plant and lay off 77 workers while continuing production in the rest of the state. The Baltimore Sun reports that the city's tax is partially to blame:

While retailers have said they feel the brunt of the beverage tax, Pepsi officials said the levy also affects manufacturers and distributors, and signals an unfriendly business environment. As sales for retailers decline because of the tax, they buy less from the manufacturers, Pepsi spokesman Mark Dollins said.

"When we're looking at where to do business ... we look at what we believe is an environment where we can invest and production lines where it makes the most economic sense," Dollins said.

While it's nice to have Maryland as an example of how tax hikes destroy jobs and prosperity, it certainly isn't good for Maryland.

January 12, 2011

US Economic Freedom Rank Drops Again

The Wall Street Journal and the Heritage Foundation released their 2011 Index of Economic Freedom, and for the second year in a row, the US dropped.

The United States, however, is no longer "the Land of the Free" economically. Our Economic Freedom Index score fell to 77.8, moving us down to 9th internationally behind such countries as Denmark, Canada, and first-place Hong Kong. What drove America's decline? Huge increases in government spending. Despite obvious past failures of Keynesian spending policies in countries like Japan, the U.S. government undertook a massive government spending spree designed to combat unemployment and slow economic growth. This Keynesian stimulus has proved to be an abject failure: Unemployment is still above 9 percent for a post-World War II record 20th month in a row, and economic growth has not returned as strong as the Obama Administration predicted.

This spending, more than any market factor, poses the greatest risk to American economic dynamism. Relying on government spending to create growth not only has failed to reduce unemployment but has also prolonged the crisis by hampering private sector investment. Bloated government debt has turned the economic slowdown into a fiscal crisis, with economic stagnation fueling a long-term employment crisis. And the Index shows that this truth applies to many other countries as well: Index data show that countries with the highest levels of government spending had growth rates 4.5 points lower, on average, than countries where government spending was under control.

Carl Rollins Keeps Louisville in A Rut

Last week, the Kentucky Senate passed SB 3, a bill that would allow the creation of charter schools in Kentucky. It would also allow better parental choice in Louisville, where they have serious problems. In an effort to force-change the racial makeup of Louisville neighborhoods, the Jefferson County School Board has created impossible busing plans that leave children with multi-hour commutes to and from school. It's untenable, and it hasn't produced any positive results. As Richard Innes of the Bluegrass Policy Institute put it:

So far, Jefferson County has wasted millions on busing over the past 40 years, but the schools in the West End are not materially improving, adults living in the East and West sides of town are still quite segregated, hence the continued demand for busing (after 40 years, if that was going to change, it would have) and thousands of students still get left behind.

Even the Jefferson County School Board recognizes the serious problems:

Carol Haddad, a member of the Jefferson County Board of Education, made the following comments, accompanied by a palpable share of emotion. Some of Ms. Haddad's comments:

"In spite of some of the low test scores - and we know we have to deal with that"

Yet the only plan put forward by the School Board is complete opposition to any discussion of SB 3. They don't just oppose the bill, they don't even want to talk about it.

Asked whether he plans to hold a hearing on the bill, Rollins said, "Not if it is my decision," adding that he believes the bill is dead.

"My intention is not to hear the bill," he said.

House Speaker Greg Stumbo, D-Prestonsburg, "stands with the chairman on this issue," spokesman Brian Wilkerson said Tuesday.

Kentucky education is suffering from a tremendous lack of leadership.

Governor Beshear refuses to even read the bill that has been available since August:

While many Democrats and Jefferson County educators oppose the bill, Gov. Steve Beshear said Tuesday that he is still reviewing it and hasn't reached a conclusion on whether he supports or opposes it.

Asked why he hadn't reviewed the bill, which was prefiled in August, Beshear said: "A governor is busy with a lot of things, and you prioritize things. When the legislative session rolls around is when you start paying more close attention to the legislation that is filed."

The Commissioner of Education frets that "All I know is we've got to do something," but

In a meeting with The Courier-Journal Editorial Board Tuesday, Kentucky Education Commissioner Terry Holliday would not offer his opinion on the neighborhood schools bill, calling it a moot point because of the House's likely refusal to take it up.

It is ridiculous and tragic that everyone in Kentucky recognizes the problem, but Carl Rollins and Greg Stumbo refuse to even discuss the only proposal available.

January 10, 2011

Tea Party Can Claim Credit for Kentucky's Budget Choices

Over the past two years, Kentucky has largely chosen to cut expenditures from the General Fund rather than increase taxes. It can't be excused that Greg Stumbo, David Williams and Steve Beshear stuck us with tax hikes on tobacco and and a double tax on alcohol in 2009, and have created an untenable debt situation, but state expenditures have been reduced by $1 billion against the election-year inflated spending levels of 2008.

The alternative scenario is what is playing out in Illinois:

In tough fiscal bind, Illinois prepares steep tax increases

By Michael A. Fletcher
Washington Post Staff Writer
Saturday, January 8, 2011

After years of papering over severe budget shortfalls, Illinois lawmakers Friday were closing in on a plan to raise the state income tax by 75 percent and refinance roughly $8.5 billion in debt in an effort to stabilize the state's finances.

Throughout the budget debate in Kentucky, President Williams and the governor repeatedly noted that 'now is not the time to raise taxes'. That choice to reduce spending rather than raise taxes is a direct result of the pressure created by the Tea Party.

Senate Passes Charter Schools Bill

As a part of Senate Leadership's first-week legislative agenda, they passed SB 3 which allows the establishment of charter schools in Kentucky. Here is what the Bluegrass Policy Blog posted about this legislation:

This historic event marks the first time charter school legislation has met the approval of either chamber of the Kentucky Legislature. It is an important step forward in an effort long supported by the Bluegrass Institute to provide the commonwealth's students and parents more educational options and control.

The bill, Senate Bill 3, will allow local school boards, at that local board's option, to create these innovative public schools in Kentucky. It opens new doors for the state to develop these education crucibles where real research on educational methods can take place outside of the 'one size must fit all' restrictions and red tape that stifles the regular public school system.

SB 3 will provide real opportunities for innovation in education in Kentucky, and provide real choice for Kentucky students and families. SB 3 is a likely KEY VOTE for the 2011 session.

January 7, 2011

UPDATED: Grayson to Resign to Run Harvard Program, BG Mayor to Become SOS, Will Run in '11

UPDATE from Business Lexington:

Bowling Green Mayor Elaine Walker has been named as his successor by Governor Steve Beshear.

"This constitutional office is too important to the citizens of this state to allow any delay in appointing a new leader," Gov. Beshear said. "Therefore, I am excited to announce that Elaine has accepted this position and agreed to bring the skills and commitment she has shared with the people of Bowling Green to Frankfort. I am confident that she will be an excellent leader for our state."

Walker also used the occasion to announce her intent to run for the office in the upcoming November election. She has spent nearly 30 years in government according to the Governor's Office including working for members of Congress and the Los Angeles City Council. She has been mayor of Bowling Green since 2005 after first winning election in 2004.

CN2 Politics reports:

Secretary of State Trey Grayson confirmed he will leave office at the end of the month to become director of the Harvard University Institute of Politics, allowing Democratic Gov. Steve Beshear to appoint a successor.

Trey Grayson announced he will be director of the Harvard University Institute of Politics.

Grayson, a Republican, will leave office during the last year of his second and final term as Secretary of State.

Now Beshear will be able to pick a replacement Secretary of State, who is responsible for overseeing election activities and handling business filings with the state.

...

The field of Secretary of State candidates is far from set. Among those being mentioned on the Democratic side are state Auditor Crit Luallen; former Democratic Party Chairman Jennifer Moore; Lexington businesswoman Alison Lundergan Grimes, who is daughter of former Democratic Party Chairman Jerry Lundergan, and state Rep. Rick Nelson of Middlesboro, among others.

On the Republican side, former U.S. Department of Agriculture official Hilda Legg and Garrard County Judge-Executive John Wilson are still considering joining Johnson, a Todd County businessman, in the race.

Palmer Attempts to Kill Tax Reform

Sen. Palmer today attempted to amend SB 1 in committee and on the floor of the Senate. The amendment has three parts. The first would add three members of the House and three members of the Senate to the task force. This would answer our earlier concern about the task force and and Sen. Leeper seemed agreeable to this part of the proposal.

But the other provisions are killers. Sen. Palmer would put the government in charge by appointing the Commissioner of Revenue as the Chair. It would also take the teeth out of the proposal, by removing provisions allowing the task force's recommendations to be considered by the General Assembly.

Humorously, Palmer stated that he needed to add the six legislators so that the tax issue wasn't left only in the hands of professionals.

Next, Sen. Blevins attempted to add children's advocates to the tax-experts on the task force, because he said the commission doesn't have a heart.

KYCFG will Key Vote sfa1 and sfa2 negatively.

SB 1 passed the Senate 25-13. Democratic Sens. Jones and Neal supported the measure.

Reforming Corrections the Right Way

Newt Gingrigh editorializes in the Washington Post that states can save resources and more effectively ensure public safety while reducing the prison population.

Several states have shown that it is possible to cut costs while keeping the public safe. Consider events in Texas, which is known to be tough on crime. Conservative Republicans joined with Democrats in adopting incentive-based funding to strengthen the state's probation system in 2005. Then in 2007, they decided against building more prisons and instead opted to enhance proven community corrections approaches such as drug courts. The reforms are forecast to save $2 billion in prison costs over five years.

The Lone Star State has already redirected much of the money saved into community treatment for the mentally ill and low-level drug addicts. Not only have these reforms reduced Texas's prison population - helping to close the state budget gap - but for the first time there is no waiting list for drug treatment in the state. And crime has dropped 10 percent from 2004, the year before the reforms, through 2009, according to the latest figures available, reaching its lowest annual rate since 1973.

Last year we both endorsed corrections reforms in South Carolina that will reserve costly prison beds for dangerous criminals while punishing low-risk offenders through lower-cost community supervision. The legislation was a bipartisan effort with strong support from liberals, conservatives, law enforcement, the judges and reform advocates. The state is expected to save $175 million in prison construction this year and $60 million in operating costs over the next several years.

Read the article.

January 6, 2011

How House Republicans Ranked in 2010

We mentioned in an earlier post that the House Republican Caucus elected some particularly low-ranking Republicans to leadership. Here's a list of last year's Republican Caucus, their 2009-2010 rank and their 2009-2010 score. You can view the entire scorecard here. The Kentucky Club for Growth considers a score of 70 or above adequate, and a score of 85 or higher merits the designation of Defender of Economic Freedom. The new Republican Leadership are bolded.

Rank Representative Score District
1 Lee, Stan 86% 45
2 DeCesare, Jim 81% 21
3 Wuchner, Addia Kathryn 76% 66
4 Fischer, Joseph M. 74% 68
5 Harmon, Mike 72% 54
6 Dossett, Myron 68% 9
7 Kerr, Thomas Robert 68% 64
8 Koenig, Adam 67% 69
9 Floyd, David 66% 50
10 Farmer, Bill 65% 88
11 Comer, James 61% 53
12 Webb-Edgington, Alecia 60% 63
13 Montell, Brad 60% 58
14 Bratcher, Kevin D. 60% 29
15 Moore, Tim 59% 26
16 Brinkman, Scott W. (retired) 59% 32
17 Housman, Brent 57% 3
18 Osborne, David 57% 59
18 Santoro, Sal 57% 60
20 Upchurch, Ken (retired) 56% 52
21 Couch, Tim 55% 90
22 York, Jill 55% 96
23 Hoover, Jeffrey 54% 83
24 Rudy, Steven 54% 1
25 Embry Jr., C.B. 54% 17
26 Turner, Tommy 52% 85
27 Rader, Marie L. 49% 89
28 Ford, Danny R. 47% 80
29 Carney, Bam 47% 51
30 Crimm, Ron 46% 33
31 Butler, Dwight D. 39% 18
32 Siler, Charles L. (defeated) 38% 82
33 Higdon, Jimmy (elected to Senate) 38% 24
34 Stewart, Jim 36% 86
35 Simpson, Arnold (Democrat) 35% 65
36 DeWeese, Bob M. 35% 48

Senate Committee Approves Two Steps in The Right Direction

Yesterday, the Senate A&R Committee approved two pieces of process-related legislation that could help create a better environment in the General Assembly to pass pro-growth legislation.

First is SB 5, a potential KEY VOTE for the KyCFG's 2012 Scorecard. SB 5 simply requires a 48-hour viewing period on any legislation that would raise taxes or appropriate funds.

The second is SB 1, which creates a task force instructed to review and recommend improvements to the Kentucky tax code. It specifies that any recommendation would be subject to an up or down vote in the House and the Senate without amendment.

The sponsors of SB 1, David Williams and Bob Leeper, should be commended for their leadership in creating this novel approach to attempt real reform. As Williams notes in a Herald-Leader report:

Williams said Beshear and the Democratic-controlled House, where a tax bill must originate, have not taken the lead on the issue. This bill would allow the Senate to push for tax reform.

Additionally, the instructions to the task force laid out in the bill are sound:

  • Focus on the creation of jobs and enhancement of production capacity;
  • Examine the tax and revenue structure based on its adequacy, equity, sustainability, predictability, and efficiency;
  • Focus on the impact of the tax and revenue structure on the competitiveness of the Commonwealth and our ability to attract businesses and individuals to locate, live, work, and invest in the Commonwealth; and
  • Place an emphasis on making the Commonwealth a low-taxed state;

That's a fair prescription for a more pro-growth tax code.

It is also great that the effort includes direction to examine not just state but local taxation as well:

Develop criteria for assessing the effectiveness of the current state and local tax and revenue system, as well as the systemic impact of any proposed changes affecting revenues.

Our only concern lies in the makeup of the task force. Five university economists, two CPAs, one PVA, and a tax attorney. While the task force is instructed to solicit advice from business associations, the associations and their advice are hardly adequate substitutes to the input real job creators should have. Kentucky business owners should be a part of the team, not simply offer advice through association lobbyists.

It will probably not matter. House Speaker Greg Stumbo says the proposal is D.O.A. in Kentucky's Good-Ol'-Boy House:

The panel will not include any legislators that can vote on the potential changes. For the legislature to approve a far-reaching overhaul of how the state generates revenue, legislators should be part of the process, Stumbo said.

"In the end, tax modernization is going to have to be decided by the members of these two chambers," Stumbo said. "I'm not for abdicating the authority or the responsibility, really, of the legislature."

We actually partially agree with the Speaker -- it would seem to us that the task force's recommendations would receive guidance and an improved chance of passage with the right legislators included on the panel.

So there's a test of Stumbo's leadership: will he commit to improving Kentucky's tax code, make a small amendment and move the legislation forward, or will he sit on his hands, keeping Kentucky on the same path we've always been on?

January 5, 2011

New Senate A&R Membership - Harper-Angel, Shaughnessy Removed, Four R Freshman Added

As David Williams promised, he added all four Republican freshman Senators to the Appropriations and Revenue Committee for the 2011 session. As we predicted last month, a spot was made available by Republican Floor Leader Robert Stivers giving up his seat.

In other notes, Sen. Vernie McGaha replaced Sen. Ernie Harris as the committee's vice-Chair, and two of the five Democrats on the committee were replaced.

Sens. Denise Harper Angel and Tim Shaughnessy, both Louisville Democrats, were replaced by Sens. Walter Blevins, a Democrat from Eastern Kentucky and Gerald Neal, a Democrat from Louisville.

Here is the Committee for 2011. * denotes the Republican freshman:

Sen. Bob Leeper [Chair] (I)
Sen. Vernie McGaha [Vice Chair] (R)
Sen. Walter Blevins (D)
Sen. Joe Bowen (R*)
Sen. Tom Buford (R)
Sen. Jared Carpenter (R*)
Sen. Ernie Harris (R)
Sen. Jimmy Higdon (R)
Sen. Paul Hornback (R*)
Sen. Ray S. Jones (D)
Sen. Alice Forgy Kerr (R)
Sen. Gerald A. Neal (D)
Sen. R.J. Palmer (D)
Sen. Joey Pendleton (D)
Sen. Brandon Smith (R)
Sen. Jack Westwood (R)
Sen. Mike Wilson (R*)

Williams-Farmer Ticket to Report Raising Nearly $650,000 in Two Months

In a press release, the Williams-Farmer claims to have outpaced all non-incumbent gubernatorial tickets in Kentucky history, raising $647,021 in two months of fundraising, with an additional $100,000 loaned by David Williams to the campaign.

We do not have new numbers for any other tickets, but the Beshear-Abramson ticket reported having raised $3,105,964 in October of last year.

January 4, 2011

House Republicans Keep Leadership

The House Republican Conference has voted to keep its leadership team in place from the previous cycle, electing Rep. Jeff Hoover as Floor Leader (2010 Rank: #23), Rep. Bob DeWeese as Caucus Chair (#36) and Rep. Danny Ford as Whip (#28).

The choice of Republicans to keep such a moderate team in place must surely be a reflection of their complacency in the minority. After all, in what was a tidal-wave year for Republicans, the ranks of Republicans in the House still stand at only 42.

(That's right, those rankings are basically out of 35.)

New Government-Expanding, Anti-Growth Regulations In Kentucky

New regulations that took effect on January 1 will expand government, redundancy and expense for homeowners and all Kentuckians.

New regulations in Kentucky that take effect Saturday will require contractors to apply for permits and have inspections conducted for new heating or air conditioning systems.

The Kentucky Public Protection Cabinet says the regulations also apply to homeowners installing a system in a new home or an initial system in an existing home.

Not only are contractors required to be certified by the state, the state is not trusting the certification and requiring inspection of the work done by certified contractors. This accomplishes little more than employing inspectors and creating expense that will make comfortable living cost more for every homeowner and renter in Kentucky.

2011 Session Begins Today

The 2011 Regular Session of the General Assembly begins today.

This year is a 30-day "short session." While they convene today, they will meet only for four days this week, then adjourn until February. While they are in this week, they will elect leaders for the Republican s and Democrats in the House and Democrats in the Senate. Senate Republicans completed their elections in November, reelecting their slate.

In February, the Session could address a host of issues. Here are a few summaries in the media:

Alessi searches for agreement in the Session.

Cheves looks at tax reform, schools, pension reform, prisons, and Medicaid.

Brammer has low expectations.

Van Benschoten looks at the agendas pushed by messaging strategies.

Check back here as we keep track of the legislation that will affect your pocketbook!

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

* Free market principles
* Lowering taxes
* Reducing spending
* Decreasing the size of government
* Judicial reform
* Protecting property rights
* Expanding school choice
* Reducing needless regulation

We will hold endorsed candidates accountable for these principles by monitoring each candidate on a vote-by-vote basis. As a Club member, you will receive candidate monitoring updates and scorecards on a regular basis. Join us today.