FRANKFORT, Ky. (WDRB) – Gov. Matt Bevin said Monday he will veto the tax overhaul and two-year state budget passed by the legislature last week, forcing lawmakers in Republican-controlled House and Senate to either muster the votes to override him or head back to the drawing board on Friday for the final two days of their session.
“I am going to work with our legislature and I’m going to work with the job creators and the people who are funding all of this to make sure we get this right,” Bevin, a Republican, said at a news conference.
Bevin said the tax bill – which raises taxes on cigarettes and retiree income, cuts the state corporate and individual income tax for top earners and applies the 6 percent sales tax to a handful of services including auto repairs – is “not as thoughtful or as comprehensive as it needs to be.”
In a joint statement, Senate President Robert Stivers and House Speaker Pro-Tempore David Osborne said Bevin is "misguided in his interpretation" of the budget and tax bills.
"We believe Governor Bevin would be best served to meet with legislators to understand their thoughts and rationale before making a final decision on vetoing the revenue and/or budget bills,” they said.
Stivers and Osborne gave no indication whether the legislature will attempt to override Bevin's vetoes or try to rewrite the bills.
Bevin said he likes of the idea of lowering tax rates while subjecting more things to taxation, but suggested that lawmakers arbitrarily picked services to tax while leaving too many out. Bevin did not say which specific tax changes he would support, however.
“You don’t just pick and choose and have unintended consequences,” Bevin said, adding that the tax reform was rushed through the legislative process. “We must do this in a way that is truly across the board.”
Lawmakers used the estimated $480 million in new tax revenue raised by the tax hikes to balance the state budget, but Bevin said they still fell short of making ends meet while failing to budget for known expenses such as bond payments on Kentucky Wired, the state broadband network under construction.
Stivers and Osborne said they are "comfortable" with the Legislative Resource Commission's projection of how much the tax bill will raise, however. They do not agree that the new money won't be sufficient to balance the budget.
"To our knowledge, the Governor has had no discussions with any legislators on the details of this budget and what he might consider to be a shortfall," they said.
Despite his criticism of the tax bill, Bevin said it’s clear the state needs to generate more revenue to pay down its $60 billion debt to pension plans for public employees – or about $13,500 for every resident, including children, of the Bluegrass State.
“You can’t wish for money to just magically appear,” he said.
Bevin’s announcement gave new hope to proponents of raising Kentucky’s per-pack tax on cigarettes by at least $1. The tax bill he plans to veto included a 50-cent increase.
In a statement, the Coalition for a Smoke-Free Tomorrow said the veto “creates another opportunity for legislators to save money and save lives. Raising the cigarette tax by at least $1 would reduce public health care expenditures and help create a healthier, more competitive workforce.”
The group, whose members include more than 150 health, business and other organizations, had argued that a 50-cent hike wouldn’t result in fewer people smoking because retailers would use coupons and other discounts to blunt the cost increases.
In a statement, the Democratic Party of Kentucky said it agrees with Bevin’s vetoes, but for different reasons.
“The Republican-proposed tax bill increased taxes on the working class of Kentucky and the budget bill continues the war on public education,” Democratic Party Chairman Ben Self said. “Instead of passing a bad bill behind closed doors at the last minute with no public input, we need to focus on bills that help the working class not the 1 percent.”
The Kentucky chapter of the National Federation of Independent Business was among those groups that called on Bevin to veto the tax bill.
Tom Underwood, the NFIB Kentucky state director, claimed in a statement last week that the plan would unevenly affect small businesses.
“Many of the targeted services are both provided by and used by small business, raising their costs and that means they’re going to have to either raise prices or try to make up the difference by cutting staff,” he said.
Underwood also criticized the legislative process, saying the bill was “rammed through the General Assembly with absolutely zero input from the people it would affect.”
Americans for Prosperity, a group that favors limited government and low taxes, applauded Bevin's vetoes.
"Even with all the smoke and mirrors the budget doesn’t meet the constitutional requirement that it be balanced," Andrew McNeill, the director of AFP's Kentucky chapter, said in a statement. "Now is the time for true fiscal conservatives in the General Assembly to step up to produce a budget that is balanced, based on realistic assumptions, and respects the taxpayers who have been footing the bill for the General Assembly’s reckless tax and spending for far too long."
Reporter Marcus Green contributed to this story. Copyright 2018 WDRB News. All rights reserved.