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FRANKFORT, Ky. (WDRB) -- Gov. Steve Beshear unveiled a tax reform plan Tuesday that includes limiting wealthy seniors' ability to claim the state's generous exemption on retirement income, creating a state-level earned income tax credit for the working poor and applying the state sales tax to services such as the labor on car maintenance.
The plan faces uncertain prospects in the General Assembly, but Beshear vowed to continue to advocate for the changes even if they are not adopted in the current session.
"For us not to look at this and not to address it would be to not uphold our responsibility," said Rep. Rick Rand, a Bedford Democrat who chairs the House Appropriations and Revenue Committee.
Beshear's office released the following summary of the plan's components:
Creates a Tax Code that Competes for Quality Jobs:
Reduces individual income tax rates. When coupled with existing Family Sized Tax Credit, the proposed Earned Income Tax Credit, and the new Hold Harmless credit, every working Kentuckian will benefit from this rate change proposal.
Enacts a Refundable Earned Income Tax Credit (EITC) at 7.5 percent of the federal credit. This tax credit is targeted to low-wage earners, and research shows the EITC will be reinvested in local communities, which stimulates the economy.
Lowers the top corporation income tax rate from 6 percent to 5.9 percent
Phases in ‘single factor apportionment' solely on sales for corporation income tax
Creates an angel investor tax credit
Expands the state's Research and Development tax credit to human capital
Doubles the New Markets Tax Credit
Exempts inventory from state property tax
Eliminates selected negligible state property tax rates for tangible personal property
Helps Kentucky's Signature Industries Thrive and Expand:
Creates an income tax credit for the bourbon industry
Exempts sales and use tax on certain equine products, similar to other livestock
Exempts sales tax on pharmaceuticals for food animals
Lowers wholesale tax on beer, wine and distilled spirits
Repeals the distilled spirits case sales tax
Creates a Healthier Kentucky Workforce to Attract Jobs
Increases tax on cigarettes to $1
Increases tax rate on other tobacco products commensurate with cigarette rate increase
Creates tax on e-cigarettes at 20 percent of value
Restores cigarette rolling papers tax
Modernizes Code to Acknowledge Changes in the Economy and Technology
Broadens the sales tax to include selected services. Kentucky long ago moved from a goods-based economy to a services-based economy, but the tax code has not adapted to this transition. This proposal expands the sales tax to the labor associated with installation and repair of taxable goods, certain recreational activities, and certain commercial, residential and personal services. Additional information is attached.
Clarifies that the sales tax is applicable to all prewritten software, regardless of delivery method. This addresses new challenges for the sales tax created by sales on the digital cloud.
Applies sales tax and transient room taxes to the entire hotel accommodation price. This modernization proposal clarifies that all amounts paid for staying in a Kentucky hotel or similar accommodation, including amounts charged or retained by online travel companies, are included in the tax base for the sales tax and state and local transient room taxes.
Modernizes Code to Acknowledge Changing Demographics, Differences with Other States
Reduces retirement income exclusion for taxpayers with a federal AGI of more than $80,000; phases it out for AGI over $100,000. This proposal still keeps Kentucky's tax code among the friendliest for retirees. Social Security benefits are currently not taxable in Kentucky and would not become taxable under this proposal.
Phases out $10 Individual Income Tax Credit
Requires same income tax filing status for married couples at state level as federal level
Wednesday, February 26 2014 1:12 PM EST2014-02-26 18:12:10 GMT
Washer-dryer line at Appliance Park (2013 GE press photo)
LOUISVILLE, Ky. (WDRB) -- General Electric Co. could get $15 million a year from Kentucky taxpayers under a bill pushed by State Rep. Larry Clark of Louisville, according to a new analysis by the LegislativeMore >>
General Electric Co. could get $15 million a year from Kentucky taxpayers under a bill pushed by State Rep. Larry Clark of Louisville, according to a new state analysis.More >>