Preliminary recommendations from a state blue ribbon commission on Kentucky tax reform suggest taxing a larger share of Social Security benefits, reducing itemized deductions and limiting tax breaks on pension income, the Louisville Courier-Journal newspaper reports today.
There are not yet any recommendations regarding the state’s income tax rates.
According to the report, commission Chairman Lt. Gov. Jerry Abramson said the initials proposals remain tentative and are not formally being advised, yet. It is projected Thursday’s suggestions would give the state $400 million annually in additional revenue.
The newspaper reported that several commission members say they will only agree to recommendations to expand the income tax base if current tax rates are reduced.
Meanwhile, the Courier-Journal reports that tentative changes approved Thursday have started to give shape to Kentucky’s tax-reform efforts, including:
• Cutting the amount of retirement income exempt from taxation to $15,000 from its current $41,110 ceiling.
• Disallowing 75 percent of the total amount of itemized deductions for things such as home mortgage interest, charitable deductions, property taxes and local income taxes.
• Taxing Social Security income at the same levels taxed by the federal government. Currently, Social Security income is exempt from the state income tax.
• Establishing a state Earned Income Tax Credit for the working poor at a rate of 15 percent of the federal Earned Income Tax Credit.
Increasing taxation of Social Security benefits brought comment from commission member Joe Wright, a farmer and former state senator from Harned, who said it “is not going to happen,” according to the report. Wright said he wants a final recommendation to include raising revenue for education and other state programs.
The commission was asked to make a recommendation “without a political filter,” Abramson said, noting Gov. Beshear’s charge in setting up the body.
Longtime tax reform advocate state Rep. Bill Farmer, R-Lexington, said, “It’s easier to have something in there that they (legislators) can take out. Let it be a bargaining chip.”
Farmer and several other commission members supported the moves only as a swap in exchange for reducing income tax rates.