The Chamber supports efforts to simplify the state’s tax code at every opportunity…Photo shows the various 2010 tax returns being mailed and required for just one small business from Si Deane, a Chamber member and owner of Alliance Real Estate

A BUSINESS-FRIENDLY KENTUCKY:The Commonwealth needs economic development and jobs. With fierce competition for ideas and talent, Kentucky must aggressively implement policies that invite investment. While the state fares well in some areas that businesses gauge when determining where to establish operations and/or headquarters, it rates poorly in other areas. Business-friendly policies that drive economic development will also result in more tax revenue for the state to further important education and basic government funding needs.

Specifically, the Chamber supports:

■ Fair tax modernization: The state’s tax code needs to be balanced to incentivize business investment while providing sufficient revenues for the state. Specifically, the state’s personal income tax puts it at a disadvantage and should not be raised. Long-term, lowering the state income tax should be considered. Lowering the state’s corporate tax would also make Kentucky more competitive to attract business and industry. While raising revenue by extending the sales tax to more services is tempting, the state should consider its current status of taxing only six services as an advantage to be promoted and not as one to be increased.

■ A thorough review of the state’s current 56 exemptions to the state’s 6% sales tax. A determination should be made to consider which sales tax exemptions are net positive to the state and which ones are not. Applying the sales tax to those that are deemed counterproductive should be strongly considered. Exemptions that are known to be productive, such as those for agriculture equipment and supplies, should be kept.

■ Unlike many states, Kentucky’s larger communities do not have local tax options. This has resulted in the state having one of the most centrally-controlled economies in the nation. Allowing first, second and third-class cities to have a local sales tax option should be strongly considered. Any such move should require city governments to conduct a vote of its citizens before a local sales tax can be implemented.

Tax Simplification: The wide array of taxes, exemptions and ever-changing rules provide an expensive challenge to business and industry, especially small businesses. A recent survey of Chamber members showed that 61% of respondents say tax compliance is a major cost for their business. Only 8% said “searching” for every possible exemption outweighs the expense of compliance.

The Chamber supports efforts to simplify the state’s tax code at every opportunity. One example would be the state adopting a unified local tax code. Additionally, the Chamber believes a consolidation of state departments that handle state income and taxes may eliminate duplication, save money and create one central department for tax compliance questions and answers.

The Chamber also supports these business-friendly measures:

■ Worker’s Compensation: An equitable Worker’s Comp system must clearly define injury and disability, require independent medical exams and objective medical findings, protect the integrity of exclusive remedy and minimize litigation. The Chamber supports legislation that overturns case law that is contrary to these primary principles as well as legislative and regulatory efforts to control rising medical and prescription drug costs.

■ Proactive tort reform: The 2010 Institute for Legal Reform study ranks Kentucky’s legal system 40 out of the 50 states in a survey of in-house corporate legal counsels, a drop from 29th in 2009. A leading factor for this poor rating is the number of civil lawsuits filed in Kentucky circuit courts which jumped 60 percent from 2002 to 2009. Kentucky is among a minority of states that does not have a state law that requires “clear and convincing” evidence of wrongful conduct to support damage awards.

■ Prevailing wage changes: The state’s current prevailing wage laws unnecessarily add costs to public construction projects.

■ Right to Work: Workforce policies are increasingly an important factor in business and industry location decisions. The Chamber supports legislation that gives employees the freedom to choose whether or not they join and/or support a union at their place of employment.

PUBLIC EMPLOYEE BENEFITS: While Kentucky’s public employees rightfully deserve benefits, they are in many cases far richer than what the private sector—which provides public employee pay and benefits through taxation—can afford. The current system of benefits is unsustainable and is a growing threat to other needs in the Commonwealth.

Chamber’s position: The Chamber supports a continuous and ongoing review of public employee benefits, including those of elected officials, which are known to be some of the most generous in the country. The Chamber encourages lawmakers to continue the dialog to bring public employee benefits more in line with those in the private sector.

EDUCATION: Education success and achievement is vital to the Commonwealth’s future. The Chamber remains supportive of overall education accessibility, achievement and accountability.

Chamber’s position: The Chamber supports these specific initiatives to improve education achievement locally and across Kentucky:

■ Drop out age: The mandatory school compulsory attendance age should be raised from 16 to 18 to create a culture of education achievement and expectation in Kentucky.

■ Require education accountability: Individuals and institutions should be held accountable for student achievement. To support this effort, the Chamber encourages the ongoing development of the P-20 data collaborative effort led by the Kentucky Department of Education, Council on Postsecondary Education, Education Professional Standards Board and the Education and Workforce Development Cabinet. This project collects student and teacher performance data and links it to improvements for Kentucky’s education system.

■ University/college bonding: The Chamber supports allowing Kentucky to join the 43 other states that allow public universities and colleges to issue their own revenue bonds to finance building projects that generate sufficient income to cover their costs.

TRANSPORTATION INFRASTRUCTURE:Kentucky, like the nation, is experiencing a growing problem of needed infrastructure construction and repair while the traditional gas tax revenues to fund it are flat or decreasing due to increased fuel mileage of modern vehicles. At the same time, the growing availability and popularity of hybrid and electric cars adds to the problem. Kentucky’s state road plan is regularly billions underfunded. At the same time, new bridges with a price tag totaling more than $6 billion are needed along the Ohio River, including the Interstate 69 bridge near Henderson.

Chamber’s position: The Chamber supports these specific transportation initiatives:

■ Public/Private Partnerships: The Transportation Cabinet (KYTC) should have the authority to work with private entities to finance, construct, improve, maintain and/or operate transportation facilities such as the Ohio River bridges.

■ Design-Build: KYTC should also have statutory flexibility to participate in design-build projects, as some of Kentucky’s surrounding states currently have, and use this authority as a useful engineering and construction tool to facilitate projects when feasible.

■ Fees for “Next Generation” Motor Vehicles: The legislature needs to create a fair and equitable way to assess fees to vehicles that use Kentucky’s streets, roads and highways but don’t use gas or diesel as their main source of fuel. This could take the form of a flat fee to be added to annual auto registration fees.

ENERGY POLICY:One of Kentucky’s greatest tools for economic development has been its low power costs. This is particularly true of electricity, which is primarily driven by access to coal. Indeed, Kentucky is a major

part of the U.S. energy picture ranking third in the nation in coal production and fifth in total energy production. The state accounts for approximately one-tenth of U.S. coal production and

nearly a quarter of U.S. production east of the Mississippi River, according to the U.S. Energy Information Administration. Coal, however, is under attack by environmentalists and

regulatory agencies.

Chamber’s position: While the Chamber supports environmental stewardship, it must be balanced with realistic responsibility and the fact that dramatic energy regulation stands to affect Kentucky families and jobs perhaps more than any other state. Changes to environmental policy should be done through the legislative process, not by regulatory agencies.

HEALTHCARE:Healthcare costs continue to a major cost for individuals, business and industry. A survey of Chamber members in the fall of 2011 showed that 85% consider healthcare insurance costs to be a “major” or “big” concern. The uncertainty of national healthcare reform and its coming mandates add to the concern. The Chamber believes these actions would reduce healthcare costs for Kentucky:

■ Create a Kentucky-based Health Insurance Exchange: The state has a limited time to create its own “American Health Benefit Exchange” which is designed by national healthcare reform to create a robust health insurance marketplace for individuals and small businesses. The legal authority to create a state insurance exchange must be done by the 2012 General Assembly to be ready for operation by January of 2014.

■ Expand mandate-free coverage: Kentucky has made progress to reverse the trend of costly mandates that increase insurance costs but more can be done. The Chamber discourages the addition of any mandates that would raise costs for employees and employers.

■ Medical malpractice reform: Constitutional and statutory changes are needed to limit frivolous litigation that often results in the practice of “defensive medicine” and increased healthcare costs. This is especially important to a border community like Owensboro which competes for healthcare professionals with Indiana where medical malpractice reform is already in place.

■ Wellness: Kentucky consistently ranks poorly in nationwide health indicators. The Chamber supports legislation that provides incentives for healthier lifestyles.

UNIFORM STATUTE OF LIMITATIONS ON EMPLOYEE TERMINATION SUITS:Current Kentucky law allows employees varying time frames, up to five years after cessation of employment, to bring a wrongful termination or discrimination lawsuit. Limitations in many states are three years or less. Limitations under most federal laws affecting the employment relationship are two years or less.

Chamber’s position: Kentucky’s five-year time period on employee wrongful termination or discrimination lawsuits places an inordinate burden on employers. The Chamber supports changes to state statute that would make all employment discharge and discrimination type actions more uniform. The statute of limitations on wrongful termination or discrimination cases arising out of the employment relationship should be no more than two years after cessation of employment.

CIRCUIT COURT PROCEEDINGS:Businesses wishing to challenge state statutes and/or appeal the actions of a state agency by filing suit are currently required to file with the Franklin Circuit Court in Frankfort. This serves as a deterrent to business and means that legal decisions made by that court form the basis for statute and their interpretations throughout Kentucky.

Chamber’s position: The Chamber supports changes that would allow businesses to file suit in the Circuit Court in their own county of business.

CONCEALED-CARRY LAWS:During the 2006 General Assembly, legislation was passed that makes it unlawful for an employer to prohibit anyone, including employees, from having a firearm or ammunition in a vehicle if that individual is legally allowed to possess a firearm. This effectively means employers cannot prohibit employees from bringing firearms onto the employer’s property. At a time when employers are increasingly concerned about workplace safety, this law seems counterintuitive.

Chamber’s position: The Chamber opposes any expansion in the current concealed-carry law and its relation to the workplace.

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