Kentucky Governor Considering Tax Reform

April 28, 2009

Kentucky Governor Steve Beshear (D) is supposed to be close to calling a special session in May or June to consider reforming the state tax code. One suggested basis would be introduced HB 51, which lowers to state sales tax from 6% to 5%, broadens its base, and eliminates the individual income, corporate income, and LLC taxes. Beneficiaries of many of the current exemptions have lined up against the package.

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A tax is a mandatory payment or charge collected by local, state, and national governments from individuals or businesses to cover the costs of general government services, goods, and activities.

A sales tax is levied on retail sales of goods and services and, ideally, should apply to all final consumption with few exemptions. Many governments exempt goods like groceries; base broadening, such as including groceries, could keep rates lower. A sales tax should exempt business-to-business transactions which, when taxed, cause tax pyramiding.