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Gutting the golden goose

Dolly Parton sang: “You’re known by the company you keep.”

However, when it comes to the hated alternative minimum calculation (AMC) tax – a gross-receipts tax charged to companies that, in some cases, don’t even make a profit – it becomes clear that Frankfort’s leading politicians are known more by the company they don’t keep and even less by the words they speak.

By refusing to eliminate the AMC, Kentucky’s political leaders show they don’t enjoy the company of hard-working entrepreneurs, who take risks and make investments that offer Kentuckians opportunity and prosperity.

House Speaker Jody Richards used to talk about ridding Kentucky of the AMC’s scourge. In a refreshingly impulsive moment of pre-General Assembly economic candor – highly unusual for Kentucky’s establishment politicians – Richards blurted out that the tax is “un-American.”

It also helps fill state-government coffers, thus providing additional funding for more wasteful spending at the expense of business owners, who otherwise would the money to hire new workers, expand operations and increase contributions to Kentucky’s underperforming economy.

The state Budget Office reported that corporate income-tax revenue increased by a whopping 109 percent between fiscal years 2004 – the year before the AMC became effective – and 2005, the first year of its collection. On the other hand, sales-and-use tax revenue, which offers a true look at the state economy’s vitality, rose only 6 percent between fiscal years 2004 and 2005.

Officials claim there’s no way to tell how much of that revenue increase can be attributed directly to the AMC. But what becomes perfectly clear from data showing the steep rise in revenue – compared with paltry economic growth – is that the commonwealth’s political leadership seems more than willing to hoist a slow, painful death-by-taxation upon a golden goose.

By refusing to use his influence and experience to rid businesses of this onerous tax, Richards shows that he enjoys the company of big spenders, who never saw a harmful tax or wasteful government program.

If, as the ancient Greek poet Menander warned, “Bad company corrupts good character,” then when it comes to Kentucky’s political leadership, “big-spending company despoils economic opportunity.”

Contact the Bluegrass Institute, Kentucky's free-market think tank, at (270) 782-2140. Read past Shine the Light articles at www.bipps.org.

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