House Democrats offer alternative budget, tax plan
FRANKFORT, Ky. - House Democrats offered an alternative tax and budget plan Tuesday, angling to get Gov. Ernie Fletcher to call the General Assembly back to Frankfort.
A skeptical Senate Republican leader said it likely would be "constitutionally, technically impossible" to pass a budget before the fiscal year ends on June 30. A top aide to the governor said the proposal seemed to have dubious implications for business.
Without quick action by the legislature, Kentucky would be left without a budget after June 30, last day of the fiscal year. Legislators adjourned on April 13 without passing a budget. The Senate insisted on including a tax plan put forward by Fletcher and the House refused.
The Fletcher plan was a "revenue neutral" combination of tax cuts and tax increases. He proposed to raise taxes on tobacco and alcohol products, satellite television and hotel and motel rooms. He wanted to reduce taxes on personal income and on corporations, though he proposed to broaden the corporate income tax to apply to more types of corporations.
The Democrat plan offered Tuesday included much of Fletcher's corporate plan but omitted any tax hike on cigarettes or other products. It relied instead on a recent revenue forecast that the state will take in $305 million more than first expected.
Fletcher said he would not call a special legislative session without an advance agreement between the two chambers. Senate Republican leaders have continued to insist on inclusion of a tax plan with a budget.
House Speaker Jody Richards had argued for quick action on a budget and deferral of tax action until the General Assembly's next regular session begins in January.
"The essential element of getting a budget is compromise," Richards, D-Bowling Green, said at a news conference. "We feel like we've moved more than halfway."
The Democrat plan, if enacted, would give more money to public schools and state colleges and universities than provided for in an austere budget Fletcher submitted in January. It also would raise the state's low-income tax credit, dropping 190,000 current taxpayers off the rolls.
In separate interviews, Senate Majority Leader Dan Kelly and Fletcher's chief of staff, Daniel Groves, zeroed in on a particular difference between the Democrat plan and Fletcher's proposal.
Both proposed to eliminate a number or corporation deductions. But Fletcher proposed to immediately cut the top corporate income tax rate, now 8.25 percent, to 6 percent. The Democrat plan would reduce it to 7.5 percent next year and to 6 percent the year after.
Kelly, R-Springfield, and Groves both said the difference to businesses would be $66 million. Kelly that difference, even for a single year, might prompt some companies to move headquarters to another state.
Groves noted that the Democrat plan, unlike Fletcher's tax proposal, would do nothing to fix the state's telecommunication tax, which a court declared unconstitutional because it applied to cable television but not to satellite TV.