Bluegrass Beacon: Good policy, not divisive politics, must be the state’s priority

By JIM WATERS
Bluegrass Institute for Public Policy Solutions

Thursday, March 9, 2023 — How much more economically competitive and free – including from special interests – might Kentuckians be if government’s priority was sound policy rather than divisive politics?

A few weeks ago, Democratic Gov. Andy Beshear signed House Bill 1, which codified action the Republican-dominated legislature took last year by passing House Bill 8.

HB 8 reduced the personal income tax rate to 4% and stipulates additional half-percentage point reductions would occur in following years provided revenues meet required thresholds and the state’s Budget Reserve Trust Fund remains sufficiently funded.

The ultimate goal: eliminate the individual income tax and move Kentucky to a consumption-based policy where more of government’s revenues are raised through the sales tax.

The best part of this story: the governor signed HB 1 even though he opposed it.

Politicos lamented that Beshear only signed the bill because he wants to score political points during an election year.

However, if we want Kentucky to become competitive again – a goal frequently supported in this column – the question must be: Is this the right policy, election year or not?

A nonpartisan focus on developing sound policy rather than partisan power grabs in Frankfort and in county courthouses and city halls across Kentucky would create an environment where the interests of taxpaying citizens dominate the decision-making.

The governor signed the income tax rate reduction – lukewarm about it though he was – while acknowledging the policy provides some relief to Kentuckians in their current tussle with inflation.

See, the best policies happen when opposing them becomes so unpopular that even their ideological and partisan opponents yield.

Last April, Beshear vetoed HB 8, claiming that cutting taxes “threatens Kentucky’s economic future.”

Still, in February, he signed the tax-rate cuts codified by that bill – not because he wanted to, but for the reason that he must believe enough taxpayers who vote wanted him to sign it.

Beshear’s banking on those taxpayers rewarding him at the ballot box.

After all, why can’t good policy also be good politics?

Then, there’s the politics of special interests.

The governor took executive action in June to freeze Kentucky’s gas tax that would have increased under the state’s broken road fund formula, which drives up taxes at the pump when fuel prices spike.

Senate President Robert Stivers, R-Manchester, criticized Beshear’s action, insisting it’s the legislature’s purview, not his, to take such action.

“The legislature looks forward to working with the governor to accomplish the goal of suspending any additional increase to the gas tax, but doing so in a legal and proper fashion,” Stivers said in a statement.

Yet the legislature has dragged its proverbial feet in responding to the gas-tax hike during this year’s General Assembly session, removing the shine from Stivers’ statement.

The legislature can restore the shine by acting to freeze the gas tax before this General Assembly’s session adjourns for the year.

Special interests have pressured lawmakers for years to hike the tax, or at least allow it to grow.

But shouldn’t legislators also support the right policy even if they, too, must hold their political noses while doing so?

Failure to act will leave small businesses and traveling Kentucky families wondering why their political representatives didn’t respond – especially when the opposing party’s governor indicated he’s willing to work with lawmakers to reinstate a freeze.

To be sure, Kentucky’s road fund formula needs overhauling, which should take place after the legislative session ends and a proper amount of time and thought can be given to the effort.

The Bluegrass Institute recommends freezing the tax for 18 months while a new formula is developed.

Developing the right policy that will adequately fund 21st century transportation needs matters much more to Kentuckians than which party or politician gets the credit.

But for those politicos who live for partisan credits: rest assured, if the legislators work with Beshear to freeze the tax, there will be more than enough political kudos to go around.

Jim Waters is president and CEO of the Bluegrass Institute for Public Policy Solutions, Kentucky’s free-market think tank. Read previous columns at www.bipps.org. Reach him at jwaters@freedomkentucky.com and @bipps on Twitter.

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