When political forecasters predict the winner and losers of an election, the factor most often considered is the economy. This is typically true for national elections, but economic conditions in Kentucky and the nation make it a major concern in the Nov. 8 election for governor.
Kentucky had the 14th highest unemployment rate in the nation in September, a slight improvement from 11th during 2008, Democratic Gov. Steve Beshear’s first year in office. Beshear argues that his policies have helped Kentucky weather the Great Recession better than most other states.
Republican state Senate President David Williams says Kentucky is being eclipsed by neighboring states and needs big changes in tax policy to make the state the best place in the nation to create jobs. Among other things, he proposes the elimination of the corporate and personal income tax.
Independent candidate Gatewood Galbraith says education is the key to economic prosperity and job creation. He advocates a voucher for high school graduates to be used on books, tuition, and fees for any form of higher education after graduation.
Williams’ plan would assemble a commission of tax and economic experts who would submit a reformed local and state tax system to the legislature. He wants to replace income taxes with what he calls “consumption” taxes, which will likely come in the form of a higher and broader sales tax.
His plan also calls for the elimination or suspension of several taxes, including those on aging whiskey, hay and feed for the horse industry, automobiles (the state portion, not the local), construction-related purchases by businesses, and energy used in manufacturing, processing, production, and transportation and distribution.
Williams opposes income taxes more strongly than he did during the Republican primary, when he told the Lexington Herald Leader, “A new system should emphasize consumption taxes over income taxes.”
The sales tax in Kentucky is 6 percent. Items exempt from taxes include food and prescription medications. Williams believes Kentucky needs to compete with Tennessee, which has no personal income tax, for job creation. Tennessee has a sales tax of 7 percent (5½ percent on food), plus varying local sales taxes.
While Williams supports big changes in the tax system, Beshear does not, at least for now. “As we are climbing our way out of this recession, I’m not fixin’ to support any broad-based tax increase on anybody,” he said at the Kentucky Farm Bureau forum in July.
The other major element of Williams’ plan is a package of changes affecting