As the 2017 session of the Kentucky General Assembly moves toward its conclusion, topics such as charter schools, right-to-work, prevailing wage and regulatory reductions have garnered much of the lawmakers' time and the media's attention.
But as significant as these initiatives have been, a key state senate leader told an Agribusiness Industry Network group visiting the Capitol that the focus will soon shift to tax reform, and that ag groups of all types need to prepare for that critical effort.
"The tax reform process will be difficult and painful," said Sen. Paul Hornback, R-Shelbyville, "and all of agriculture and agribusiness needs to be ready to make choices as to what is most important to them when the trade-offs begin."
His remarks came during a private meeting with AIN and Louisville Ag Club members during their Feb. 14 visit to the capital city.
Gov. Matt Bevin has said that significant tax reform is necessary if the commonwealth is to dig its way out of a public pension funding crisis that has built up over decades of underfunding and overpromising public employee retirement benefits.
He also said the reforms can't be revenue neutral, and that significant new money will be needed to satisfy the pension deficits without crippling other vital state programs.
Hornback, who chairs the Senate Agriculture Committee, said he plans to solicit input from ag leaders in the coming weeks, and expects to take part in as many meetings as are needed to hammer out consensus among farmers and their suppliers as to what ag tax policy in Kentucky should look like in the years to come.
He said the discussions should focus on both the provisions of tax laws as well as their administration at the state and local levels. Assuming sales tax exemptions are retained for producers, he noted, it would be critical to have a system in place to make sure the benefits are not extended to non-eligible recipients.
Currently, farmers are generally not charged sales taxes on purchases of inputs, such as seed, fertilizer or chemicals. Retailers are required to keep records on hand showing that purchasers are eligible for those exemptions.
Other major tax provisions affecting agriculture include the assessment of farm property at its agricultural value rather than its fair cash value when property taxes are levied. That provision was added to the state constitution in 1969, and as such cannot be changed solely through legislative action.
Ag producers have also supported retention of the limits on annual revenue increases from local property taxes that have been a feature of state law since the 1970's. That provision generally limits local and state governments to annual increases of 4 per cent, unless local voters approve the steeper increases in a referendum.
Hornback told the group that Gov. Bevin has indicated a preference for dealing with tax reform in a special legislative session this spring, fairly soon after adjournment of the regular session. He said legislative leaders are hoping to push the start date back to mid or late summer to allow more time for constituent input.
Whatever the schedule, it's imperative that the farming sector has a strategy in place for the very difficult work ahead, he stressed.
Gary Huddleston | AIN Chairman