Tax Reform 'Cleanup' Bill Scales Back Bank Taxes
Lawmakers have agreed on the framework for a tax "cleanup" bill that would drop tax rates for Kentucky banks, among other provisions. Critics say the reform package will deal another hit to state revenue at a time when budgets remain tight.
Under the compromise, the state would roll back taxes on Kentucky-based banks to the tune of $56 million annually by doing away with what's called the "bank franchise tax." But Republican Senator Damon Thayer says the costs of not tackling the problem could be higher.
"The bigger issue is not the revenue hit the state could take, but what could happen to our community banks if we don't change the law and all thes elocal banks are bought out by out-of-state banks, as we're already seeing occur," he said.
Detractors are calling the move a "giveaway" to the banks that will push revenue losses in the plan to over $106 million.
"Dollars lost to the General Fund are dollars we don't have to spend on schools, health, pensions and other needs. Our current budget made the 20th round of cuts in the last decade — expect more," Jason Bailey, head of the Kentucky Center for Economic Policy, tweeted.
The bill adds a new tax credit, set to take effect over the next two years, for low-income Kentuckians adversely affected by last year's tax bill. It also offers some state relief to health departments, universities, and others grappling with rising pension costs.
Teacher groups, meanwhile, were relieved that language from House Bill 205, which would have provided $25 million in tax breaks for Kentuckians donating to private school scholarships, did not make the cut.
The new tax change for banks wouldn't go into full effect until 2021.