Gov. Bevin lays out details of tax reform vision in remarks to Ky. Chamber Tax Summit

By Jacqueline Pitts, The Bottom Line

Delivering remarks to the Kentucky Chamber’s Tax Summit via video Thursday, Kentucky Gov. Matt Bevin detailed his vision for tax reform including moving to a more consumption-based system, getting rid of the inventory and death taxes, aligning the state’s tax code more with the federal government and more.

In the video, Bevin apologized that he was not able to attend the conference in person. He is in Washington, D.C. for a meeting with members of the Trump administration and others on economic and workforce development issues.

Bevin said Kentucky’s tax code is “antiquated” and noted the Chamber’s advocacy efforts for modernization and said he is grateful for those who have sounded the alarms on the tax code and brought attention to the need for reforms.

In terms of what he is looking at when it comes to what makes Kentucky competitive, the governor pointed to his “Blueprint for a Better Kentucky” document he produced during the governor’s race where he saw areas Kentucky could grow and prove powerful compared to other states including engineering and manufacturing.

The governor pointed to the growth of companies like UPS, DHL, Amazon and others in Kentucky as examples of how the state can become the leader in logistics.

Inventory tax is one of the areas Bevin pointed to in his remarks as something that needed to be done away with in the state’s tax code.

“If we want to produce, manufacture, engineer, design, and send to the world 21st century products, why would we dis-incentivize those who might do this by having an antiquated approach to taxation where we tax production and not consumption?” Bevin asked.

“Indeed when we get to tax reform, and it is coming, mark my words we will address and modernize our tax code as expeditiously as we can in addition to the pensions and the budgets and everything else we are wrestling with in the months ahead. But as we move forward on this front, getting rid of the inventory tax is something that has to be done. But yet it comes at a cost. When we already have constraints on our budget, getting rid of something that is an essential part of especially local and county governments, that can’t just be done willy nilly.”

Bevin went on to state that there is a ripple effect when it comes to many of the decisions that are going to be made on tax reform and asked the audience to consider that as they come with more ideas as well.

The death tax was another item pointed to by the governor as one that should be done away with, stating the state should not be driving wealth producers out of the Kentucky, one of few states that still has the tax.

Bevin said Kentucky must also align its state tax code with that of the federal government to simplify things.

“Kentucky has a very complicated, convoluted, non-user friendly tax code. And truth be told, we’re eliminating the ability to pull in more money than we actually do pull in through 400 and some odd tax expenditures. And these tax expenditures, or loopholes as they are referred to by some, are there for a variety of reasons,” Bevin said. “We exempt far north of $10 billion a year as a result of these. If we simply line our tax expenditures as closely as possible to the federal tax code, we would immediately have a tremendous amount of additional income.”

Bevin said there is an “opportunity cost” that goes along with many of the decisions they will be making as many of the states around Kentucky have more competitive tax codes and use that as a way to attract new businesses.

“To be able to compete, we’ve got to have a tax structure that allows me to go out and in good faith be able to tell people ‘you want to come here because…’” Bevin said. “So getting rid of some of these things we’ve talked about, structuring our tax code so that it’s simplified and so that it doesn’t penalize the very people we need for our future success, these are things we are going to have to do. These are things I am committed to doing.”

The governor said he hopes the Chamber’s Tax Summit will help the business community come up with ideas on how to improve the state’s tax code and designate people who can work with Budget Director John Chilton and others in the Bevin administration in these reform discussions as he said he needs the business community voice at the table.

Bevin also discussed his hope of seeing Kentucky move more toward a consumption-based tax code and economy.

“I would like to see income taxes, for example, start to not have a six in front, but a five, then a four, and a three, and to move on down to where we don’t have a state income tax. That, to me, would be the kind of incentive that allows us to attract companies as employees understandably care about these things,” Bevin said.

He also said he would like to see Kentucky examine why the state imposes a corporate income tax as he said it is not competitive and holds the state back on a global and national level.

“Success will be when the governor of Texas, and the governor of Indiana, and the governor of Tennessee, and of Florida, and of Georgia, and of fill in the blank…when the governors of these other states ask among themselves why is it all of our children need to go to Kentucky to get a job? That’s when we will know we have succeeded,” Bevin said, stating that too often Kentucky employers and parents are currently asking the same questions of other states.

For more state government news go to the Kentucky Chamber of Commerce’s The Bottom Line blog.