Blue Ribbon Commission on Tax Reform Discusses Options

Today, Kentucky is recognized nationally as a “Tax Friendly” retirement destination, but this may change if new options being talked about in Frankfort are approved.

AARP Kentucky has cautioned the Governor’s Blue Ribbon Commission on Tax Reform and expressed its concern over the panels “tentative” adoption of state tax code changes that will increase tax burdens for retirees.

In a recent press release, AARP Kentucky State Director Ron Bridges urged the Commission to reconsider its proposals increasing retiree’s tax burdens,

We again ask the Commission reconsider our earlier recommendations to consider the revenue savings available in the state’s Medicaid budget. It remains out of balance with 81 percent of its long term care dollars spent in expensive institutional nursing home care. We can do more for less for by increasing home and community based aging services today while saving taxpayers’ dollars tomorrow,” said Bridges.

In its letter to Commission members, AARP urged the Commission to exercise caution as it considers reducing the amount of retirement income exempt from taxation and increasing taxes on Social Security benefits.

Social Security is the principal source of income for nearly two-thirds of older American households receiving benefits, and roughly one third of those households depend on Social Security for nearly all of their income. Half of those 65 and older have annual incomes below $18,500, and many older Americans have endured recent and significant losses in retirement savings, pensions, and home values. Today, every dollar of the average Social Security retirement benefit in Kentucky of $13,759 is absolutely critical to the typical beneficiary.

 In prior testimony before the Commission, AARP Kentucky recommended seeking a fair and balanced approach to improving the state’s tax code. AARP again urges the 23 Commission members to consider the significant savings available for taxpayers today by increasing in-home aging services and decreasing the Medicaid program’s reliance on less cost effective nursing home care.

Too many Kentucky retirees today live in or near the poverty line and struggle to make ends meet. With 13 percent of Kentucky’s seniors living in poverty today, asking those on fixed incomes to bear more tax burden to balance or enhance the state budget is not a long-term solution.

AARP Kentucky is monitoring developments and preparing an additional response as the Commission moves closer to making final recommendations to the General Assembly for future action.

Governor Steve Beshear authorized the Commission in August 2012 to take public comment on changes to the tax code and make final recommendations to the General Assembly before 2013. The Commission meets again on November 19th and is expected to make final recommendations to the state legislature in December.

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