The Kentucky House of Representatives on Thursday passed a $1 billion tax refund bill to help people pay for the state’s debt, but some Republican lawmakers have said it could also serve as a political tool to boost Democratic lawmakers who are running for reelection in 2018.
The $1.3 billion Kentucky Fair Tax Recovery Act is the most extensive refund bill in the nation.
It includes a $250 rebate for people who pay income taxes, and it would also refund the state $2 billion in income taxes each year for 20 years.
The House also passed a state sales tax rebate bill that would boost state revenues by nearly $300 million each year and the state sales-tax exemption on gasoline, diesel, electric and natural gas.
However, House Majority Leader Kevin Dunlap (R-Frankfort) said the bill is still in its infancy.
“We don’t have a good idea of how much this would increase the revenues and how much it would hurt the economy,” he said.
“I think it’s probably not enough to put us in a position to pass it.”
Dunlap, who represents a district that includes the capital, has been working with Democrats on the bill, including Rep. Andy Schor (D-Jefferson County) and Rep. Dan McAllister (R, Boone County).
But some Republican members of the state House of Delegates are now trying to derail the bill’s progress, including Republican State Senator John R. Smith, who said the bills tax refunds are needed because the state budget is not balanced.
“If you don’t pass the Fair Tax Restoration Act, we’re going to have to have the first tax refund in the state in 30 years,” Smith told reporters Thursday.
“The budget is about $1 trillion in debt.
I’m not sure what it is that you are going to pass for the money, but it’s not enough for the Fair Restoration Act.”
Democrats have also voiced concerns about the bill.
They have accused Republicans of trying to use the tax refund as a bargaining chip in negotiations with the governor to make cuts to government spending.
Smith has been one of the few Republican lawmakers to criticize the Fair Debt Relief Act, arguing that it does not adequately address the state debt.
The Senate is expected to vote on the tax bill on Friday.