Gov. Matt Bevin says he will likely sign off on a tax bill that reduces state revenue by about $105 million per year. The changes are mostly due to an adjustment in the way local banks get taxed by the state, but also include several other tax breaks.
Following a news conference Thursday announcing a $238 million expansion at the Toyota plant in Georgetown, Bevin said the “odds are pretty high” that he would sign the tax bill.
“I will commit to that once I actually have it on my desk, but we know it has a fiscal cost of about a $100 million,” Bevin said.
When asked if Kentucky can afford to give up the revenue while the state struggles financially, Bevin said, “of course.”
“In the grand scheme of our annual budget, it is not an insurmountable task,” Bevin said.
“It’s real money, it really is and we will have to find it. But as the economy grows as announcements like this from Toyota are made as people are employed as they pay taxes, all of this is good.”
The legislature passed the tax changes in House Bill 354, originally described as a “cleanup” bill to the two-year tax bill that passed out of the legislature last year.
The bill allows banks based in Kentucky to pay the corporate income tax instead of the bank franchise tax, costing the state about $56 million a year.
Supporters of that provision say it will allow local banks to be competitive with surrounding states.
The rest of the $105 million tab comes from exempting nonprofits and university sporting events from paying taxes on admission tickets and adds several corporate tax exemptions.
The move comes as Kentucky struggles with a massive pension debt that requires the state to put record amounts of money — about 14 percent of all state spending — into the pension systems and as the state consistently has trouble generating enough tax revenue to pay for expenses.
During his 2017 State of the Commonwealth address, Bevin called for lawmakers to undertake a comprehensive overhaul of the state’s tax code that would not be “revenue neutral” — signaling that the state needs to generate more money.
But so far during his administration, Bevin hasn’t pushed for revenue-raising measures. He vetoed the legislature’s tax overhaul last year that was estimated to raise $487 million, but lawmakers overrode it.
On Thursday, Bevin predicted the state would generate new revenue by putting more people to work.
“The more of them we have, the more taxes they’re paying, the better it is for everybody. Again, we don’t need them paying more as individuals, we just need more people paying taxes. This is going to be all the difference,” Bevin said.
Thursday is the last day for lawmakers to pass bills before adjourning for a 10-day period when Bevin considers signing or vetoing legislation. They’ll return for one final day on March 28 to override any vetoes or pass new bills.
Mary Meehan from the Ohio Valley Resource contributed to this report.