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Daily Tax Report: State

Kentucky Governor Eyes Gambling, Vape Taxes to Fund Education

Jan. 29, 2020, 2:55 AM

Kentucky Gov. Andy Beshear wants to legalize sports gambling and raise taxes on cigarettes and some businesses to fund what his administration is calling an “education-first” budget plan.

Beshear’s 2020-2022 budget proposal, released Tuesday, would give Kentucky teachers a $2,000 raise, restore millions in funding for textbooks, and boost spending on preschool programs in disadvantaged areas.

Beshear (D), elected in November, proposed to bring in nearly $148 million in new revenue over the next two years. The proposed funding and tax increases could have trouble getting past the state’s Republican-controlled House and Senate.

Senate President Robert Stivers (R) was skeptical of the proposed salary increase for teachers and said that Beshear’s revenue projections may be too high.

“This was all puppy dogs and rainbows,” Stivers said following Beshear’s budget address Tuesday night.

Revenue Projections

House Speaker David Osborne (R), in remarks following the speech, said that “it’s impossible to tell at this point” whether the House will hew to Beshear’s desires.

Even under the prior administration, the House made substantial changes to Gov. Matt Bevin’s (R) budget proposal.

However, Beshear’s proposal mostly relied on revenue streams that Republicans have been open to. The General Assembly is considering a bill to allow sports betting and Republicans have recently backed bipartisan cigarette tax hikes.

Beshear’s budget estimates that about $50 million per year would come from raising taxes on cigarettes and chewing tobacco and imposing a $0.10 per fluid milliliter tax on vaping products. Legalizing sports betting, fantasy sports, and online poker would raise more than $37 million in taxes and fees over the next two years, Beshear estimated.

The last part of the governor’s proposed revenue trifecta is a bump to the minimum amount firms must pay under the state’s Limited Liability Entity Tax. The minimum amount businesses must pay under the gross receipts program would rise to $225 from $175, which Beshear estimates would raise $8.2 million per year.

Osborne said the House intends to pass its version of the budget by the end of February. The state constitution requires that a budget be enacted before the General Assembly session ends in mid-April.

To contact the reporter on this story: Alex Ebert in Columbus, Ohio at aebert@bloomberglaw.com

To contact the editors responsible for this story: Jeff Harrington at jharrington@bloombergtax.com; Yuri Nagano at ynagano@bloombergtax.com

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