- "Fairness: The tax system should treat people equitably. The Commission will review the tax burden that different taxpayers shoulder, from Kentucky families to Kentucky businesses, from small businesses to big businesses, and within different industry sectors in the state.
- Competitiveness: Any changes to the tax system should ensure that Kentucky continues to attract jobs and investment to the state, while keeping and protecting the jobs and businesses we already have. The Commission will review how Kentucky’s tax environment compares to other states and identify ways to improve business tax competitiveness.
- Simplicity and Compliance: A tax system should be easy to understand and follow. The Commission will make recommendations to ensure compliance with Kentucky’s tax system is simple for individuals and businesses and to ensure efficient administration by the state.
- Elasticity: The tax code should allow state revenue performance to mirror economic performance. While Kentucky’s code has performed relatively well during the recession, revenue growth has not kept pace with changes in the economy.
- Adequacy: The Commonwealth’s tax structure should generate sufficient funds to support critical state services. The Commission is charged with reviewing the adequacy of revenues from the current tax structure and making recommendations for improvement."
Based on rankings from the Tax Foundation, Kentucky doesn't seem to have any glaring problems. Based on Governor Bashear's State-of-the-Commonwealth address in January 2012, it seems that he is not only concerned about improvement for today, but for the future. In his address he stated:
"to prepare ourselves to compete in the future, we must, in a strategic and non-partisan way, re-align our system with the principles of fairness and with a 21st century economy. In the coming days, I will lay out a process to ensure this issue gets both the thoughtful attention it deserves and the public input needed to develop consensus. I guarantee three things:
One, all voices will be heard.
Two, we will consider all options.
And three, our focus will be on creating a system that meets Kentucky's future needs."
I think it will be interesting to see how the commission determines what the future looks like and how it impacts revenue streams. I think that should include review of the sales tax base to be sure it includes today's types of consumption (digital goods and personal services), reviews tax expenditures to determine if any are no longer needed, reconsiders the gas tax and its weakness as a tax per gallon when fuel efficiency is improving, and providing clear and simple guidance on new and emerging e-commerce activities including cloud computing.
What do you think?
1 comment:
The principles of good tax system are universally applicable to all tax structure everywhere. And this can be seen from the 5 goals created by the Blue ribbon Tax Reform Commission that reflects a good understanding of Kentucky’s institutional framework. Even though every state is unique in their way, there is a lot we can learn from studying their tax makeup. Based on the tax system of Vermont, Georgia and Minnesota, I think that the following principles will be a helpful addition to the existing Kentucky’s future tax reform goals.
(1) Neutrality: the fewer economic decisions that are made for tax reasons, the better. The primary purpose of taxes is to raise needed revenue, not to micromanage the economy, society or the environment. The tax system should not favor certain industries, activities, or products. Overall, the tax system ought to minimize interference in spending decisions and make any such involvement explicit.
(2) Stability, Certainty and Sufficiency: these interrelated concepts encourage the state to produce sustained, predictable and consistent revenues by relying on a balanced revenue portfolio that will withstand economic changes. For taxpayers, stability, certainty, and sufficiency mean a tax system where tax laws are not in constant flux. For example, policymakers can make long-range financial planning easier for individuals and businesses by avoiding temporary tax laws, retroactive changes, and annual tax changes.1
(3) An Avenue for Resolution: The system of taxation should include an avenue for resolving tax disputes that are unbiased, transparent, cost-effective for all parties, and easily accessible.
(4) Inherently Competitive: The fundamental design and structure of the business tax system should reduce or eliminate the need for subsidies, exemptions, and related business tax expenditures.
(5) Tied to Benefits Received: There should be a strong, direct relationship between the nature and level of business taxation in the state and the cost of benefits and services provided to businesses by state and local governments.
(6) Friendly to Economic Growth
(7) Administratively Inexpensive: The administrative costs of oversight and compliance with state and local tax laws should be minimized for taxpayers and for state and local governments.
(8) Resistant to Political Change: The basic design and structure should discourage legislative tinkering and improve the predictability of tax burdens for business planning purposes and revenues for state budgeting purposes.
Reference:
Vermont Blue Ribbon Tax Structure Commission; Article: “Guiding Principles”;
Website: http://www.vermonttaxreform.org/?page=guiding_principles
Report: “2010 Special Council for Tax Reform and Fairness for Georgians”; Author: A.D. Frazier;
Date: January 7th, 2011,
Website: http://fiscalresearch.gsu.edu/taxcouncil/downloads/FINAL_REPORT_Jan_7_2011.pdf
Report: “Minnesota’s Millennium: Launching a New Generation of Competitive Leadership and Economic Growth”; Date: February 13th, 2009; website: http://taxes.state.mn.us/mntaxreform/reports/TRC_report_2009.pdf
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