Republicans in Kentucky's state legislature overturned Gov. Matt Bevin's (R) vetoes of their tax overhaul and budget plan Friday, capping a dramatic confrontation between members of the same party that has also seen thousands of teachers descend on the state Capitol in protests for better pay.
The impasse between the governor and the Republican lawmakers kicked off earlier this month, when the state legislature unveiled a tax package to dramatically cut income and business taxes in the state. The plan aimed to pay for those cuts by dramatically increasing sales taxes, leading one analysis to project that it would wind up raising taxes on all but the wealthiest 5 percent of state residents.
Meanwhile, the state's legislature separately approved a budget that raised the state's per-pupil funding to $4,000, from $3,700, amid intense pressure from teachers who demonstrated at the Capitol and throughout the state after Bevin vetoed both measures.
Republicans in the state legislature defended the tax measure, in part, as necessary to avoid deeper cuts to education and to fund teachers' pensions, with nonpartisan staff in Kentucky's House of Representatives saying that the tax package would generate an additional $239 million in state revenue in 2019 and an extra $248 million in 2020.
But the state's budget director said later that those numbers were inaccurate and that the tax package would actually cost Kentucky $50 million over the next two years.
“We want to come up with a smart, thoughtful, more balanced approach,” Bevin said at a news conference where he announced his vetoes. “We need to govern in a different way.”
Other critics have said that the budget does not meaningfully increase state education funding and also cuts preschool and after-school funding. “It's not improving education: We're still 16 percent below where we were a decade ago on education funding,” said Jason Bailey, executive director of the Kentucky Center for Economic Policy.
The House overturned Bevin's veto of the tax plan by a 57 to 40 margin, while the Senate did so by a 20 to 18 margin.
The veto of the budget plan was overturned by a 66 to 28 margin in the House, and by a 25 to 12 margin in the Senate.
Democrats in Kentucky were quick to criticize the discord in the Republican Party and the tax package as favoring the wealthy. “It’s amazing that even when Republicans control both chambers of state government as well as the governor’s mansion that they can’t even agree on the direction to take Kentucky,” Ben Self, chairman of the Democratic Party, said in a statement.
The tax overhaul, now law, will flatten Kentucky's corporate and personal income tax rates, setting both at 5 percent. Currently, Kentucky's corporate tax rate runs between 4 percent and 6 percent, while its income tax rate ranges from 2 percent to 6 percent.
The plan attempts to make up funding for those cuts by nearly doubling the cigarette tax and imposing sales taxes on 17 additional services, including landscaping, janitorial work, golf courses and pet grooming. Overall, the plan will give an average $7,000 tax cut to the richest 1 percent of Kentuckians, who average more than $1 million in annual income, according to the Kentucky Center for Economic Policy.