FRANKFORT, Ky. – The chairmenof the General Assembly's budget committees say the tax bill lawmakers rushed to passage last weekinadvertently cut an important tax credit used by Toyota and some of Kentucky's other big manufacturers.
Both Sen.Chris McDaniel, R-Taylor Mill, and Rep. Steven Rudy, R-Paducah, said that they expect lawmakers will fix that problem on Friday if the General Assembly overrides Bevin's veto of the tax bill.
“We look forward to correcting that once any vetoes are overridden,” McDaniel said.
Rudy said,"Assuming we override the vetoes, I would say there's a good chance there will be a 'cleanup' bill," making changes to the tax bill, Rudy said. And he said that there is "a very strong chance" that the cleanup bill will restore the tax credit program relied on by manufacturers.
The tax bill makes sweeping changes to Kentucky’s tax code. Its major provisions would lower the income tax rate for most people and corporations, put the 6 percent sales tax on 17 servicesand raise the cigarette tax by 50 cents per pack to $1.10.
But the bill also attempts to close some loopholes by suspending some tax incentive programs. And concerns surfaced this week about the suspension of at least one program.
Among many reasons he gave for vetoing the tax bill, Bevin complainedthat it eliminates “one of the key economic development tools Kentucky uses for job retention.”
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And in response to questions from Courier Journal, Rick Hesterberg, spokesman for Toyota Motor Manufacturing North America, said in an email that if the tax bill becomes law, “then specific fixes will need to be made to avoid some unintended consequences. The current bill, as it stands, would repeal the Kentucky Jobs Retention Actwhich would have negative impacts to Toyota and other manufacturers.”
GE Appliances in Louisville also participates in the jobs retention act, so "under the repeal, that could impact us," spokeswoman Kim Freeman said in an email. "We are waiting to see what the outcome will be and could have additional comment at that time."
A spokeswoman with Ford Motor Co., which has about 13,000 employees at two factories in Louisville, said on Friday that tax credit is "of strong interest to Ford, and we appreciate the focus on preserving the Jobs Retention Act— it’s really important for manufacturing jobs in Kentucky."
Rudy said that normally when legislation as sweeping as the tax bill is passed problems lateremerge requiring a fix. "This time we have the ability to get the clean-up done before the end of the session," he said.
Both Rudy and McDaniel saidother changes are likelyto be part of a cleanup bill that would be considered if lawmakers override Bevin's veto of the tax bill. But they declined to say what those changes might be because otherchanges are still under discussion and not as likely to be made as the provision relating to the Jobs Retention Act.
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Bevin’s Economic Development Secretary Terry Gill said in a letter to senators on Thursday the bill’s repeal of the Kentucky Jobs Retention Act would be a major blow. Gill, who made no reference to efforts by lawmakers to fix the problem,pleaded that Bevin’s veto stand.
Repealing the jobs retention act, Gill said, “would terminate current incentive agreements that underpin billions of dollars in ongoing and potential future reinvestment and expansion projects at Toyota Motor Manufacturing Kentucky (TMMK) in Georgetown, and in Louisville at Ford Motor Co.’s two assembly plants and GE Appliances.”
Gill also said the bill’s suspension of other tax credits would have negative implications.
But McDaniel said he believes "there's a chance, perhaps a better-than-even chance" that the Senate will vote to override Bevin's veto of the tax bill.
Rudy said, "I think there's a strong possibility the House will" override Bevin. "But we'll have to see where the members are tomorrow."
Rudy said, "No one wants to pay taxes. But I believe the cost of doing nothing is far greater than the cost under what we're doing with tax reform and the budget.
Lawmakers are scheduled to convene Friday and Saturday to consider Bevin’s vetoes and take action on a few pending bills. The session must adjourn by midnight Saturday, which will be the 60th day of a session limited by the Kentucky Constitution to no more than 60 days.
Reporter Grace Schneider contributed to this story. Tom Loftus: tloftus@courierjournal.com; Twitter: @TomLoftus_CJ. Support strong local journalism by subscribing today: courierjournal.com/toml.
