Positive Change
Two responsible parties make for better government

They did it – they finally did it! The Kentucky General Assembly enacted both a budget and a tax reform plan. It took several tries under two successive governors, but an election last November worked wonders in getting a state budget approved. That election achieved what a recalcitrant Kentucky House of Representatives had refused to do for two years.

The Democratic House lost seven seats in November’s election and political observers tie those losses directly to the House refusal to approve or even negotiate a budget with the governor. There is a new sheriff in town in the person of Governor Ernie Fletcher, the first GOP governor since the late Governor Louie Nunn left office in 1971. While media pundits and the Democratic House have long claimed Governor Fletcher’s proposed budget and tax reform plan absolutely could not both be considered at the same time, the governor stood firm in the face of adversity and criticism.

After a year-long stalemate with the Kentucky House, the governor took the issue directly to the people by way of the ballot box. The result is a more competitive makeup of the House of Representatives with more Republican members and a less obstructionist Democratic House Caucus.

Many governors have gone to Frankfort with a goal of overhauling Kentucky’s tax system and have failed to convince the Legislature. This governor has a history of achieving goals while routinely being underestimated by the media and his political opponents. He won a Congressional seat against tremendous odds in a district heavily registered for the other political party. Then he won the governorship by a wide margin despite his “minority party” status.

Gov. Fletcher can now count another political victory in the passing of this budget and tax reform measure, which to a great extent contains his original agenda. To be sure, he did not get everything he wanted, but he largely achieved his goal of changing the state’s tax structure and simultaneously getting a budget that is reasonably conservative.

No major employers have been attracted to Kentucky since Toyota and UPS located here many years ago. A complex and punitive corporate tax structure has been blamed for that. The 2005 tax reform eliminates the corporate license tax and substantially reduces the corporate income tax. Kentucky tax filers who fall below Federal poverty guidelines will be removed from the income tax rolls and income taxes will be slightly reduced for many other taxpayers. The cigarette tax will increase to 30 cents from three cents, bringing Kentucky more in line with other states. Alcoholic beverage tax will increase from nine percent to 11 percent at the wholesale level; lodgings tax will increase by one percent to promote tourism, and satellite TV customers will be taxed at three percent. Limited liability companies will no longer be tax exempt.

A legislatively enacted budget eliminates the confusion and uncertainties created by the lack of any budget at all over the past two years. Government is a forum for compromise between the executive and legislative branches, and compromise they did. The tax reform that was approved, while not revolutionary, is a good start in modernizing an archaic system.

It is a fact that Kentucky is becoming a two-party state after many decades of being under single-party control. Any time a single party stands unchallenged astride the political landscape of a state, that state will suffer inefficient and sometimes corrupt government. The best government occurs when there are two strong political parties, each challenging the other. That is now happening in the state capitol and it is a positive development indeed.

Pat Freibert is a former Kentucky state representative from Lexington.
editorial@lanereport.com

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