FRANKFORT, KY (12/14/11) – Representatives Bill Farmer, R-Lexington (88th District) announced today he is pre-filing a bill for the 2012 Regular Session that seeks to make a comprehensive overhaul to Kentucky’s tax code system. In filing the bill, Rep. Farmer said the time for talking about tax reform is over, and it’s time for the leadership in Kentucky to take action.
“As we prepare once again to draft another two-year budget, it is clear that the years of ‘robbing Peter to pay Paul’ have dramatically impacted our ability to find revenue to provide for the services and facilities needed in state government,” said Rep. Farmer. “Meanwhile we continue to use a tax code that is more than 70 years old. Considering both factors the time is now that we address a complete overhaul of our tax system.”
“We know that comprehensive tax reform is needed in Kentucky, and while this bill may not be everything for everyone at least it’s a start and certainly a vehicle in which the much needed debate can begin,” said House Republican Floor Leader Jeff Hoover, who worked with Rep. Farmer on his bill. “There is no longer any need to sit back and talk about possibilities. This is a proposal which, while not perfect, can allow us to begin the debate in earnest and in good faith. I commend Rep. Farmer for his continued work and his passion in pushing for the overhaul of the Commonwealth’s outdated tax code.”
Under Rep. Farmer’s proposal a new two-tier tax structure of 2.5 and 5 percent on individual income. The rate a person would pay would be based on their annual income. In addition, a 3 percent tax rate will be created for pass through entities, which includes S-corporations, LLC’s and Partnerships, and would also lower Kentucky’s sales tax rate to 5 percent beginning in October 2012. Rep. Farmer’s bill would also eliminate Kentucky’s corporate income tax.
It also seeks to combine most of the tax exemptions under the Sales and Use tax, including coal for the manufacture of electricity, food purchased with Food Stamps, recycling machinery or equipment, and the first $1,000 of sales made by people for fundraising events and garage/yard sales. It would also make the trade-in value allowance permanent for vehicles purchased after October 1, 2012.
It also seeks to eliminate Sales and Use exemptions on sales to counties, cities or special districts; machinery for new and expanding industries; sales of materials, supplies, and services to any non-profit organization that is used to restore, maintain, or operation a historic site; and energy and energy producing fuels used in manufacturing. The proposal would also remove exemptions on sales of text books and other course material by school bookstores
In addition Rep. Farmer’s bill would also expand the Sales and Use tax definition for numerous areas of business that are currently exempt from charging sales tax for services rendered, including accounting, tax preparation, bookkeeping and payroll services; lease or rental of commercial real estate; advertising, public relations, marketing research and public opinion polling services; legal services; and dry cleaning and laundry services.
If passed and signed into law the changes in Kentucky’s income tax law would not go into effect until January 1, 2013.
The bill is pre-filed as BR 236 for the 2012 Regular Session.
Information provided by Michael Goins
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