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Panel identifies $700M more in Ky. tax revenue

Roger Alford, Associated Press

FRANKFORT, Ky. (AP) -- Senior citizens would shoulder more of the tax burden in cash-strapped Kentucky under recommendations expected to be presented to the state Legislature for consideration next year.

A tax reform panel appointed by Gov. Steve Beshear approved a plan Thursday that could generate about $690 million a year in additional revenue — largely from retirees by taxing more of their pensions.

Some $485 million would come from extending the state's income tax to retirees who draw at least $30,000 a year. Social Security benefits would be exempt.

Another $200 million would come from expanding the state's sales tax to household utility bills and a litany of other services that have traditionally been exempt in Kentucky.

Lt. Gov. Jerry Abramson, who chaired the Blue Ribbon Commission on Tax Reform, said convincing lawmakers to go along could be a big task.

"If you take the political filter off, some of these are very likely to occur and some are very likely not to occur," he said Thursday.

Kentucky was hard hit by the economic recession, forcing Beshear to cut about $1.6 billion from the state budget since he took office in 2007. He appointed the commission to recommend a simpler tax code that would generate enough revenue to meet state needs even during recessions.

Abramson said the recommendations will be presented to Beshear by Dec. 17 in hopes of having legislation ready for lawmakers to consider when they convene next month.

Beshear has said he's not sure lawmakers will have time to pass tax reforms in the legislative session, which is scheduled to end in mid-March. He said he's prepared to call a special session and keep lawmakers on the job longer if necessary.

The plan approved by the commission would reduce revenue from corporate taxes by more than $90 million in hopes of making Kentucky more attractive to companies looking to relocate.

State Rep. Jim Wayne, a Louisville Democrat who served on the commission, said the recommendations would provide a welcome cash infusion for government programs and services.

"It's still not what we need, but it's heading the right direction," he said.

Wayne said the proposals would ease the tax burden on the poor while the middle-income and the wealthy would pay slightly more.

Wayne said the state's financially troubled pension system for retired government employees could absorb much of the proposed new revenue. The pension system needs an additional $300 million a year.

The panel's recommendations also call for increasing the state's cigarette tax to $1 a pack from the current 60 cents, a move that could generate about $100 million a year.

Before approving the final recommendations, the panel rejected scores of proposals, including one that would have generated $500 million a year by instituting a 6 percent tax on groceries.