State elected officials indicate they are committed to accomplishing major tax reform in the near future, perhaps early next year. As this issue went to the printer, federal officials were finalizing the biggest change to the U.S. tax code in 30 years. The Lane Report sent a solicitation to a variety of business officials in Kentucky asking what they would like to see happen. The responses we received show strong business community for Kentucky tax code reform that simplifies it, lowers corporate rates, eliminates the inventory tax, relies more on sales tax revenue and removes many current exemptions, incents business investment and raises cigarette taxes.
Tax Reform Ideas
“Tax and regulatory policy at all levels of government must be guided by a well-researched, balanced approach. It must provide for necessary public investments and expenditures, while avoiding policies that are disincentives to economic growth and private-sector employment and investment. State and local tax code changes should encourage long-term growth, and provide revenue options so local governments can tailor tax policy to local conditions. Commerce Lexington encourages lawmakers to develop policy that helps ensure Kentucky remains competitive with its surrounding states. We urge lawmakers to evaluate existing tax policies and proposed changes by considering their intended or unintended consequences; avoiding burdensome conditions; promoting a climate that encourages business investment and job growth; providing sufficient revenues; ensuring stability over time; examining fairness, while not discouraging economic activity, employment or wage growth; and creating cost-efficient compliance measures.” Robert Quick – President/CEO, Commerce Lexington Inc.
“The tax code and tax rates are crying for an update. The proposed new federal tax code bill has the potential to impact the economy and lives of U.S. citizens. The big unknown is whether the new tax code effect will be positive or negative. An overhaul is badly needed, but it deserves to be thoroughly analyzed and not rushed to market. The last major tax revision took a year to be fully vetted before it was implemented. Until we have all the specifics, it’s hard to have a meaningful opinion. While I have not read the bill, on the surface I agree with the corporate income tax reduction and repatriation. Until the economy responds to the changes, I would like to see more of the burden placed back on businesses receiving the largest part of this benefit. Do not put the first tab on any U.S. citizen and keep it that way until we start to see the benefits.” Carl T. Howard – President and CEO, Fazoli’s
“Personal and corporate rates should be reduced gradually over time, replaced by a broader-based sales tax on consumables by people. Do not make the mistake of including a business-to-business services tax; that failed when attempted in several states. From an economic development perspective, eliminate the inheritance tax and move to single-factor apportionment for multistate revenue companies. Today’s multifactor apportionment discourages headquarters from locating in Kentucky. Out-of-state companies typically pay a lower effective Kentucky tax. The inventory tax should be eliminated; however, since the revenue is local, suitable replacements will be needed for local taxing districts. Amend the constitution to allow a local-option sales tax. I have witnessed the great successes with this item in Florida for years. It forces local leadership to prioritize items that can muster local voting support.” John A. Williams Sr. – Chairman Emeritus, Computer Services Inc.
“Tax reform that is good news for the business community is going to be good news for the vast majority of our clients. A tax system focused on being business friendly will yield dividends for all Kentuckians. We need to look at examples of our bordering states, including Indiana, Ohio and Tennessee, to model a more business-friendly system. Tax savings should be geared toward reinvestment and relocation incentives that will increase the number and size of our current and potential Kentucky businesses. Corporate tax rate changes that allow them to reinvest in and grow their organizations will be beneficial for companies and communities as a whole. Should these changes come to pass, I hope companies will use it as an opportunity to raise wages, increase their workforce, invest in company infrastructure, and support their communities in general.” Diane Medley – Managing Partner, MCM CPAs & Advisors
“The Kentucky Association for Economic Development supports tax policy modernization. Pro-growth policy will create a more business friendly Kentucky and strengthen the commonwealth’s competitiveness in a national and global marketplace. Tax codes that attract corporate investment will create high-wage jobs and accelerate Kentucky’s ascension as the manufacturing and engineering epicenter of the United States.” Matt Tackett – President/CEO, Kentucky Association for Economic Development
“Tax reform is essential to moving Kentucky forward to embrace the 21st- century economy. We should focus on building a business-friendly climate that reduces tax rates and exemptions and broadens the tax base. Lower tax rates will be possible if we simplify the tax code, eliminate the inventory tax, reduce the inheritance tax’s impact on family-owned businesses and reduce special-interest exemptions that stand in the way of progress. We need to examine the personal income tax that encourages individuals to split their residency with states without a personal income tax. Our legislators need to stand up higher education and promote business expansion that will create a wide range of job opportunities for all our citizens. Once that’s accomplished, our state will start moving on sound financial footing that will address long-term pension reform.” Luther Deaton Jr. – Chairman, President and CEO, Central Bank
“Because GLI represents the bi-state Greater Louisville region’s business community, we see first-hand how companies on the south side of the river are disadvantaged by Kentucky’s unfriendly business tax climate. GLI supports a far more simple and competitive tax code that promotes growth and investment while putting Kentucky on an equal footing with adjacent states like Indiana and Tennessee. Moving to a consumption-based system, expanding the sales tax, decreasing personal and corporate income taxes, and eliminating the inventory tax are all important steps that will put Kentucky on the path to economic success.” Kent Oyler – President/CEO, Greater Louisville Inc.
“Kentucky’s current tax system places a disproportionate burden on businesses with facilities and employees in the state because the apportionment factor (the formula used to determine how much of a company’s income is subject to tax in each state) includes Kentucky payroll and Kentucky property investments. Kentucky tax reform should have a goal of not imposing a higher tax burden on businesses investing in Kentucky.” Steve Jennings, local office managing partner of the Crowe Horwath Lexington office
“As an engineering, architecture and construction company, issues like tax reform that impact our manufacturing customers also affect Gray. At a federal level, Gray Construction believes corporate tax reform would put the U.S. economy on a stronger path, especially in the manufacturing sector. Manufacturing strength means higher paying jobs across the U.S. and that means more tax revenue. A lower tax rate and immediate expensing would enable manufacturers to reinvest through new capital investments or expansions and distribute the additional income to employees. But for tax reform to really have the impact the U.S. needs, businesses need to behave responsibly. That means tax savings should be reinvested in ways that grow the economy and add jobs, not simply passing savings on to shareholders.” Stephen Gray – President/CEO, Gray Construction
“If Kentucky is going to truly compete, our tax code must be improved. Business leaders tell us the system is too complex and compliance is too costly. Numerous economic development experts say our code creates a competitive disadvantage because it punishes economic productivity. A modernized tax code should encourage investment, productivity and higher wages for Kentuckians. The chamber is on record in favor of a consumption-based tax system, repealing the inventory tax, lowering the corporate income tax and increasing the cigarette tax.” Dave Adkisson, President/CEO, Kentucky Chamber of Commerce