Whitesburg KY

State must fix its tax system

This is an election year in a poor state, five years into a slow recovery from a devastating recession. No wonder everyone is talking about jobs.

Political talk about jobs is often just that — talk. But two recent economic reports offered insight that candidates and officeholders should take to heart.

One says that places with an educated, trained work force not only attract more and better jobs — no surprise there — but also that they recover more quickly from economic shocks.

The other report shows that Kentucky has been slower than the rest of the nation to emerge from the recession, producing fewer and less desirable jobs than most other states.

But the truly bad news is that unless policy makers are willing to do the hard work of tax reform, this downward cycle will not change.

Gov. Steve Beshear offered a tax reform package — based on the work of a task force led by Lt. Gov. Jerry Abramson — to the General Assembly this year that went nowhere. There is a profound unwillingness among lawmakers to accept short-term personal political pain for collective long-term economic gain.

Beshear, in his second term with no plans to run for another public office, can take the message to voters, and those they elect, that tax reform is an essential first step in any serious, long-term jobs plan.

Senate President Robert Stivers, R-Manchester, and Speaker of the House Greg Stumbo, D-Prestonsburg, should also work with their chambers and their caucuses to get this done for Kentucky.

Kentucky’s tax code gives away more revenue in loopholes than is collected, and captures virtually nothing from the rapidly growing service sector of the economy.

With this scenario, it’s inevitable that General Assemblies will continue to cut education at every level, further undermining Kentucky’s work force preparedness.

The two economic reports mentioned earlier make this clear.

It isn’t news that education drives employment but the Federal Reserve Bank of Cleveland, whose district includes Kentucky from Lexington eastward, documented that education also plays a role in how rapidly an area emerges from a recession.

Louisville economist Paul Coomes, in a study for the Kentucky Chamber of Commerce, found our state has been slower than the nation to emerge from the recession.

But that slow recovery hasn’t been universal. The Cleveland Fed observed: “Places like Lexington … which have high shares of adults with bachelor’s degree, have also seen some of the strongest employment gains during the recovery.”

Lexington outstrips the nation in high-school graduates and those with a bachelor’s degree or higher. But Lexington is an outlier in Kentucky, which lags the nation in both categories.

Perhaps even more disturbing for all of Kentucky is where our jobs have been created in the last four years, according to Coomes’s analysis. The leader by far is “employment services,” more commonly known as temp agencies. Coomes’s list also includes government and auto manufacturing — sectors that generally provide living wages and benefits — but is rounded out with sectors like food service and nursing homes.

Any job is a lifeline to someone without one. But too many of Kentucky’s jobs leave people treading water, getting nowhere. And that’s the way it will be as long as Kentucky’s leaders avoid setting our tax structure on a course that will sustain adequate work-force training and education.

— The Lexington Herald-Leader

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