Tax reform group has some good ideas; will they go anywhere?

December 10, 2012

Tax reform in Kentucky has always reminded me of that old quip about the weather: Everybody talks about it, but nobody does anything about it.

After nearly a year of study, the Blue Ribbon Commission on Tax Reform that Gov. Steve Beshear appointed to study Kentucky’s tax code and suggest changes finished its work last Thursday and announced recommendations. A final report is due to the governor by Dec. 15.

Will Beshear embrace his task force’s recommendations and try to sell them to the public and legislators? Will the General Assembly’s leaders exercise the leadership needed to build political consensus and make change happen?

You have to give the task force credit. Rather than proposing safe but inadequate “revenue neutral” tax reform, task force members had the courage to recommend a plan that would add $690 million in revenue during the first year.

That’s still short of what Kentucky needs, but it’s a start. Pension obligations will eat up at least $350 million and the state budget has already been cut a dozen times for a total of more than $1.6 billion.

Among the task force’s good recommendations:

■ Raise the cigarette tax to $1 a pack, up from 60 cents. Given the high public cost of smoking-related diseases in Kentucky, it should be even higher, such as the $1.60 that some task force members proposed. But at least Kentucky’s cigarette tax will no longer be the lowest in the region.

■ Amend the state constitution to allow local-option sales taxes. This is a big issue for Lexington, Louisville and other cities desperate for additional revenue to meet the needs of their urban populations and economies.

■ Make the state income tax more progressive, easing the burden on low-income wage-earners and putting more of it on high-income taxpayers. Much of that would be done by limiting deductions and exemptions.

The task force also recommended creating an earned-income tax credit to give relief to low-wage families. It would be modeled on the federal earned-income tax credit, a Republican idea that has been an effective, low-cost tool for reducing poverty among the working poor.

■ Eliminate two taxes that have always seemed like insults to two of Kentucky’s signature industries, horses and bourbon. The first is the sales tax on horse feed. Cattle feed is not taxed, but horse feed is, which has never seemed fair.

The other is the property tax on barrels of bourbon aging in warehouses. Bourbon has become a worldwide phenomenon, and Kentucky makes more than 90 percent of it. But this tax gives both established and new distillers a reason to look to elsewhere to build production facilities, which could risk Kentucky’s industry dominance.

■ Expand the 6 percent sales tax on goods to include some services. This could broaden Kentucky’s tax base as the economy continues to shift from goods to services. It is essential that Kentucky tax revenues grow with the economy, and this is one way to do it.

The task force also recommended cutting corporate taxes by abut $100 million. It is an article of faith among some business people that corporate taxes need to be as low as possible. But that seems unnecessary, because studies have shown that Kentucky’s corporate taxes already are competitive with peer states.

“What are we going to gain by making them lower?” asked Jason Bailey, a task force member and director of the Kentucky Center for Economic Policy, a Berea-based research group. “The corporate income tax is a very small part of doing business.”

Rather than cutting Kentucky’s already-low corporate taxes, Bailey thinks more jobs could be created by investing that money in education, health and infrastructure. Those are areas that companies look at when choosing a good place to do business, and they are areas where Kentucky is behind many other states.

Overall, though, the task force recommendations are the most positive talk in decades toward real, much-needed tax reform. Whether Kentucky’s political leaders will do anything about it remains to be seen.

I wish Kentucky governor had said more of this

January 8, 2012

Gatewood Galbraith, one of Kentucky’s most colorful politicians, died Wednesday, just hours before Gov. Steve Beshear delivered his fifth State of the Commonwealth Address.

Many people didn’t take Galbraith or his politics very seriously, but they liked him anyway. He was a genuinely nice guy who could poke fun at opponents without leaving scars. Most of all, Kentuckians admired his willingness to point out obvious truths despite the political cost.

As I watched Beshear speak, I could not imagine Galbraith standing there before the General Assembly. There were good reasons he lost five races for governor.

Beshear’s speech wasn’t bad. He brought up some tough issues, and he avoided the “get off our backs” nonsense from last year that made him look like a coal-industry puppet.

Having just won re-election, Beshear finally admitted the need for state tax reform. Not that he has proposed any real action before the end of the year, when most legislators stand for re-election. But it was a start. Maybe.

Still, with Galbraith on my mind that day, I longed to hear more honesty, more leadership and more political courage from a governor who will not have to face voters again — and who might want a political legacy beyond “caretaker.”

I longed to hear something more like this:

Ladies and gentlemen of the General Assembly, I don’t need to tell you that Kentucky has big problems. That has long been obvious to you, me and every citizen of the commonwealth. The people sent us to Frankfort to solve these problems, not to keeping ignoring them while we take care of our friends and feather our own nests.

This is the time for bold action. We must be leaders, and leadership sometimes means taking people where they don’t want to go.

For more than a decade, state government has spent more than it takes in. We masked the problem for a while with economic growth and a lot of debt. More recently, we masked it with $3 billion in federal stimulus money.

Most of you claim not to like President Barack Obama. I’ve done my best to avoid him, too. But despite what his critics say, the president’s economic stimulus kept thousands of Kentuckians working and saved our state budget. Now that money is gone, and we must face up to our responsibilities.

We need significant long-term investments to make Kentucky’s citizens more healthy, educated and able to compete in a 21st century economy. That will take money.

Circumstances may force us to keep cutting the budget for a while, but no state or business ever cut its way to prosperity. We must spend the money we have more wisely. As political leaders, we must fight waste, fraud and abuse — and stop being some of the worst perpetrators of it.

Expanded gambling won’t solve Kentucky’s problems any more than the lottery did. We must increase state revenues in other ways. That’s right, folks, we must raise taxes.

Forget those fairy tales about how everything will be fine if we just let business do as it pleases and all but abolish government. I know, some voters love that rhetoric. But as important as the private sector is, it won’t solve all of our problems. That kind of thinking is a big reason why our nation is in this mess — the rich getting richer, the poor getting poorer and the middle class disappearing.

Folks, what Kentucky needs is real tax reform. We need a state tax system that is fair and produces revenue that grows with the economy and Kentucky’s needs. That means wealthier people should pay more. Powerful interests must lose many of their tax breaks.

Sure, our tax system must remain “competitive” where business is concerned. But that can’t mean giving business a free ride at the expense of working people. States that do that hide a lot of poverty and misery beneath their “pro-business” gloss.

You and I know this won’t be easy. It will mean facing up to powerful people and companies that have funded our campaigns. And it will mean angering voters who want something for nothing. But it’s the right thing to do.

Farmer’s tax plan changes: sales tax up, not down

January 10, 2011

When researching my column today, I missed an important change in the state tax reform proposal that  Rep. Bill Farmer, a Lexington Republican, has made for each of the past several years.

Previously, Farmer said that by eliminating the state’s personal and corporate income taxes and extending the sales tax to most services, enough revenue could be generated to lower Kentucky’s 6 percent sales tax rate, perhaps to 5 percent or 5.5 percent.

Rep. Bill Farmer

But the version of the bill Farmer filed for this legislative session calls instead for raising the sales tax rate to 7 percent. Why the change?

“The economists missed badly last year” when estimating the tax revenues that would be produced by the changes he was proposing, Farmer said. How badly? About $1 billion.

Farmer said he still isn’t sure the changes would require an increase in the overall sales tax rate at a time when lawmakers would be taxing more services and removing exemptions in order to eliminate income taxes, but he is trying to be conservative. “It’s easier to start a little high and go low than to start low and have to raise it at some point,” he said.

Not that it is likely to matter. Farmer said he has little hope that any meaningful tax reform will happen this year — his plan or anyone else’s. And he is skeptical that Kentucky politicians will ever be willing to eliminate income taxes.

As I wrote in my column today, many business leaders and politicians like Tennessee’s tax system because they say that taxing consumption rather than income is more attractive to businesses and high-income workers.

But the tradeoff for Tennessee has been some of the nation’s highest sales taxes. That leaves poor and middle-class people paying a bigger share of their income in taxes than higher-income folks. The last commission Tennessee lawmakers appointed in 2002 to study that state’s tax system proposed fixing that problem by — you guessed it — creating a state income tax.

Tennessee tax system is hardly a perfect model

January 10, 2011

When discussing state tax reform, Kentucky executives and politicians often cite Tennessee as a model. But many people south of the state line would beg to differ.

What some tax reform advocates like about Tennessee is that it has no state income tax, which gives it a competitive advantage in attracting businesses and high-income workers. But Tennessee makes up for it with sky-high sales taxes.

While Kentuckians pay a 6 percent sales tax on most goods — and nothing on food — Tennesseans pay an average 9.35 percent in state and local sales tax on non-food items, the nation’s highest rate. Food is taxed at an average of 7.9 percent, the nation’s third-highest rate.

Taxing consumption more than income to spur economic growth makes sense philosophically. But things get complicated in the real world.

Tennessee’s tax system puts a greater share of the overall burden on poor and middle-class residents. High sales taxes also hurt small businesses and retailers, because Tennesseans often cross state lines or buy online.

Both Tennessee and Kentucky suffer from chronic budget shortfalls. They also spend less on health and social services than most other states do, which could help explain why both are in the bottom tier of state rankings of income, educational attainment and health.

The Tennessee General Assembly was concerned enough about the situation in 2002 to appoint the Tax Structure Study Commission. After two years of study, it recommended changing Tennessee’s tax system to be more like, well, Kentucky’s.

The commission recommended creating an income tax that would make it possible to lower Tennessee’s total sales tax rate to 6 percent, with food taxes falling to 4 percent. The income tax would have four tiers ranging from 3.5 percent to 6 percent, and families would not hit the top bracket until they made $100,000. (Kentucky’s income tax structure, a relic from the 1950s, tops out at 6 percent for people making more than $8,000 a year, which is virtually everyone.)

Like various tax reform plans in Kentucky, the Tennessee commission’s recommendations and similar proposals since then have gone nowhere politically. But they are worth keeping in mind, especially since Kentucky Senate President David Williams, who is running for governor against incumbent Steve Beshear, has Tennessee-style tax reform on his agenda.

Two state representatives — Democrat Jim Wayne of Louisville and Republican Bill Farmer of Lexington — have long proposed competing visions for Kentucky tax reform.

Wayne would recalibrate income tax brackets to reflect modern incomes. He also would tax some services used mostly by wealthy people. Farmer would eliminate most sales tax exemptions — except for food — and add taxes on most services.

He thinks that would generate enough revenue to lower the sales tax rate below 6 percent and eliminate the income tax. While in previous years Farmer estimated that could generate enough revenue to eliminate income taxes and lower the sales tax rate below 6 percent, the version of the bill he filed for this legislative session calls for raising the sales tax rate to 7 percent. (See followup blog post.)

The solution probably lies with some combination of those proposals, especially the ideas about taxing services, eliminating many exemptions and updating income tax brackets.

What Kentucky needs is an equitable, “business friendly” tax structure that promotes economic growth without shifting too much of the tax burden to poor and middle-income people; and one that provides enough tax revenue to meet Kentucky’s needs, even as the economy evolves. The devil, of course, is in the details.

As lawmakers consider tax reform, here are a few other things to think about:

■ Economists say Kentucky, compared to other states, under-taxes real estate. Low property taxes are a legacy of political pressure from property owners and 1979 legislation that capped annual property tax increases at 4 percent, despite the fact that property values have often risen much more than that.

■ Kentucky’s coal severance tax, which has been 4.5 percent for more than 30 years, is the lowest among major coal states. The tax is 5 percent in West Virginia and 7 percent in Wyoming. In addition, the citizens group Kentuckians For The Commonwealth estimates that Kentucky taxpayers provide more than $97 million in annual subsidies to the politically powerful coal industry.

■ Lawmakers have in recent years raised cigarette taxes from ridiculously low levels. But Kentucky’s 60-cent per pack tax is still less than half the national average of $1.45.

■ Kentucky’s tax code is riddled with exemptions, few of which have been analyzed to see if they provide any overall economic benefit to the state. A comprehensive analysis is long overdue.

Old bourbon industry innovating, growing

January 18, 2010

Bourbon is one of Kentucky’s oldest products, and distillers have always cloaked themselves in nostalgia.

Even a century ago, distillers promoted their whiskey with images of log cabins and white-suited “colonels.” Brands included Old Crow and Old Barbee, which was made by a long-gone Woodford County distillery run by my wife’s great-grandfather.

Today’s brands include Old Forester, Old Fitzgerald and Old Weller. A glass of Pappy Van Winkle is about as good as bourbon gets.

But beneath this antique image is an innovative and growing industry.

The Kentucky Distillers Association last week released its first-ever economic impact study, prepared by University of Louisville economist Paul Coomes. Its findings may surprise some Kentuckians.

While other Kentucky manufacturers cut 20 percent of their jobs over the past decade, distilling employment grew by 6 percent.

The 19 distilleries in eight Kentucky counties employ 3,200 people with an annual payroll of $244 million, plus benefits. They represent 43 percent of all distilling workers in the United States.

Each distilling job creates more than twice as many spin-off jobs as other Kentucky “signature” industries such as horse breeding, tobacco farming and coal mining.

More than $1.5 billion worth of bourbon is produced in Kentucky each year. It accounts for 26 percent of the value of all distilled spirits produced in the United States. Kentucky bourbon is exported to 126 countries.

Kentucky now makes 95 percent of all bourbon, although it is seeing new competition from micro-distilleries elsewhere.

Bourbon’s fortunes have improved considerably since the 1970s, when “brown” spirits declined in popularity and many young adults saw bourbon as an “old people’s” drink.

Innovations such as super-premium brands in the 1980s and fresh marketing made bourbon popular again and fueled an international following that has caused exports to soar.

In the past decade, distilleries have invested millions to turn their factories into successful tourist destinations on the Kentucky Bourbon Trail. Distilleries have recorded more than 1.5 million tourist visits during the past five years.

“The best thing we can do is bring a tourist to Kentucky and give them a pleasant experience,” said Louisville hospitality consultant Peggy Noe Stevens, who comes from a famous bourbon family and worked 17 years in branding for Brown-Forman. “We create, in essence, ambassadors for Kentucky.”

The economic impact study was commissioned last year after the bourbon industry was slapped with yet another tax in the General Assembly’s scramble to balance the state budget.

The study notes that Kentucky spirits production and consumption produce $125 million each year in state and local taxes.

Kentucky has the highest distilled spirit taxes of any open-market state except Alaska. About 60 percent of the price of a bottle of bourbon bought in Kentucky is some form of state, federal or local tax.

“With the legislature actively talking about comprehensive tax reform, we would like to have a seat at the table,” said Eric Gregory, president of the Kentucky Distillers’ Association. “We think we’ve earned a seat at the table.”

Economists recommend directions for tax reform

January 14, 2010

FRANKFORT — This is the time each year when Kentucky lawmakers usually engage in their own version of insanity: doing the same things over and over and expecting different results.

The situation has gotten so crazy, though, that this year could be different.

Kentucky’s tax system has been out of sync with the economy for more than a decade, creating ever-larger deficits despite frequent budget-cutting and quick-fix tax increases.

The General Assembly is finally considering comprehensive tax reform, and lawmakers got some good advice Wednesday at a standing-room-only symposium organized by the University of Kentucky’s Martin School of Public Policy and State Treasurer Todd Hollenbach.

In presentations by six economists and other experts, it quickly became clear that the tax system’s inability to reliably provide enough revenue to meet Kentucky’s needs isn’t the only problem.

Compared with surrounding states, most of the economists agreed, Kentucky taxes property and the sales of goods and services too little and taxes income too much. That hurts economic growth because it puts Kentucky at a competitive disadvantage for attracting human capital and the businesses that employ it.

“We are discouraging younger, more-educated workers from moving to the state,” said UK economist Kenneth Troske.

Kentucky’s low property taxes are a legacy of rural heritage, political pressure from property owners and 1979 legislation that capped property tax increases at 4 percent a year, even though property values have often risen much more than that.

“We have a great tax code for a manufacturing economy and an agrarian economy and a poor tax code for a knowledge economy,” said Joseph Reagan, president of Greater Louisville Inc.

Kentucky’s 6 percent sales tax applies to goods but few services.

“The fastest growing part of the economy is services, and you’re not taxing them,” said William Fox, a University of Tennessee economist who first outlined the problem in a report to the General Assembly in 2002.

In addition, there are many special-interest tax breaks, but little analysis of whether they give Kentucky overall economic benefits.

Those factors create a narrower tax base and result in higher tax rates. A better system would be just the opposite: a broader base with lower rates.

Rep. Bill Farmer, R-Lexington, has proposed broadening the sales tax to cover services and closing loopholes so the 6 percent tax rate could be lowered and the individual and corporate income taxes could be eliminated.

Farmer said states without income taxes have shown more economic growth. But critics of consumption-based tax systems say they can be unfair to low-income people.

UK economist James Ziliak said that could be offset if Kentucky joined 23 other states in creating an earned-income tax credit. He recommended one modeled after the 35-year-old federal credit, which has been widely praised as a cheap and effective way to ease poverty.

Kentucky’s economy is actually a collection of at least six very different regional economies, many tied to cities in other states and all with their own special needs and issues, Troske said.

A highly centralized, one-size-fits-all state tax system doesn’t fit any region well.

A lot of tax revenues from cities go to support rural areas. But the rural-dominated General Assembly has given cities few ways besides payroll taxes to raise revenues to meet their special needs and compete for economic growth with similar-size cities in other states.

“This has hurt our local governments’ abilities to collect revenue and made us more reliant on the state,” said University of Louisville economist Paul Coomes.

Coomes said local-option sales taxes are common in neighboring states, and he noted that taxpayers are often more willing to pay taxes when they can see tangible local benefits from them.

David Adkisson, president of the Kentucky Chamber of Commerce, said that while the tax code needs improvement, the state also needs to spend money more wisely. In particular, he said, huge recent increases in state spending for employee benefits, prisons and Medicaid need to be curbed.

Kentucky needs tax and spending reform now, both to solve the potential $1.5 billion shortfall over the next two years and to create a brighter future for this historically poor state.

Ignoring the problems any longer would simply be insane.

It never seems to be a good time for tax reform

December 14, 2009

Gov. Steve Beshear says this isn’t a good time for comprehensive tax reform.

It wasn’t a good time in 2002, when economist William Fox’s report to the General Assembly showed how Kentucky’s tax structure was no longer keeping pace with changes in the economy or the state’s needs. And it hasn’t been a good time in any year since then.

Politically, it never will be a good time for comprehensive tax reform. But with Beshear’s slots campaign coming up lemons and the General Assembly facing one of the worst slash-and-burn budgets in memory, it’s at least time to begin discussing it seriously.

Reps. Bill Farmer, R- Lexington, and Jim Wayne, D-Louisville, have offered visions for what comprehensive tax reform could look like from different ends of the ideological spectrum. They were promised a hearing between legislative sessions. It didn’t happen.

Farmer would eliminate the state income tax and lower the sales tax slightly by taxing services as well as goods. Wayne would tax some services, mostly those used by wealthy people, and make the income tax system more progressive, like the federal system, taxing the rich more than the poor.

My guess is lawmakers eventually will look at some hybrid of the two. But such a plan can’t be “revenue neutral,” at least in the long run.

While public money can always be spent more wisely, the reality is Kentucky needs to invest more in education, infrastructure and social services to move up from the bottom of national rankings of income and quality of life.

Broadening the sales tax to services could make a big difference because of growth in the service economy. Kentucky also should clean up its hodgepodge of special-interest sales tax exemptions. For example: There’s a sales tax on horse feed but not cattle feed.

For state spending to remain at current levels through June 2012, lawmakers would have to find $1.9 billion in revenue or cuts. The state can cover some of that shortfall with $485 million in one-time federal stimulus money. That still leaves a $705 million gap, which means cuts are coming.

But before lawmakers bring out their axes, they should use scalpels.

The Kentucky Chamber of Commerce issued a report recently called The Leaky Bucket that highlights three areas where state spending has gotten out of whack in the past decade.

By far the biggest of those areas is public employee health care, where state spending is up 174 percent compared with an overall state budget increase of 33 percent. The state now pays $1.2 billion a year to insure active state employees, retirees and teachers — 12 percent of the total state general fund.

The Chamber thinks the state could better manage its costs with more emphasis on wellness and disease prevention. “Reasonable changes” could free almost $200 million for the 2010-12 state budgets, it says.

Those changes include having state employees pay a portion of their health insurance premium — say $50 a month — as most private sector workers must do. That would save the state $94 million a year.

The other two “leaky bucket” targets were prisons and Medicaid, the federal-state program that pays for health care for more than 745,000 low-income Kentuckians.

Corrections spending rose 44 percent in the past decade as Kentucky had the nation’s fastest-growing prison population. The Chamber outlines several ways that spending could be cut without lawmakers being accused of being “soft on crime.”

Kentucky’s Medicaid spending has grown twice as fast as total state spending, and the Chamber recommended looking to other states for “best practices” and shifting more spending to wellness programs.

When lawmakers return to Frankfort in January, they must plug some holes in the leaky bucket . But they also need to get serious about creating a new bucket, one big enough to meet Kentucky’s needs.

Kentucky can’t afford to ignore tax reform ideas

June 6, 2009

I sat through a long and painful presentation Thursday at a meeting of the General Assembly’s Interim Joint Committee on Appropriations and Revenue.

It reminded me of a bad trip to a dentist, complete with noise and vibration from workmen drilling into a nearby wall in Frankfort’s Capitol Annex.

The presentation itself was excellent, and it was obvious that Mary Lassiter is a smart and capable state budget director. What made it painful was Lassiter’s step-by-step outline of Kentucky’s financial mess — and the clear but unspoken message that it won’t improve much until lawmakers enact real tax reform.

The national economic recession isn’t the problem, although it has turned state government’s steadily rising river of red ink into a holler-washing flood.

The problem is that Kentucky is trying to operate a 21st century state on a tax system designed for a mid-20th century economy. It hasn’t worked for years, and everyone knows it.

“Clearly we’re going to have to do something,” said Rep. Jesse Crenshaw, a Lexington Democrat, echoing several others lawmakers’ comments. “We can’t come back here every six months or every year without addressing the larger problem.”

Here’s the basic issue: Kentucky has an income tax, but its limited range reflects 1950s income levels. That means low-income people pay too much and high-income people pay too little. Kentucky has a sales tax, but it covers mostly goods and not services, the fastest-growing part of the economy.

The problem and possible solutions have been studied to death for years. But governors and legislators have never found the political courage for anything but quick fixes that ignore the larger issues.

Fortunately, the last half-hour of the meeting was devoted to lawmakers’ first real discussion of two good tax-reform proposals. One comes from Rep. Jim Wayne, a Louisville Democrat, and the other from Rep. Bill Farmer, a Lexington Republican.

The two plans are different in philosophy and approach. But they both meet the four tests of a good tax system: being fair, equitable, efficient and sufficient to meet Kentucky’s needs.

Neither plan will be considered during this month’s emergency special session, which will be yet another quick-fix exercise. But maybe, just maybe, they will set the stage for real tax reform when the General Assembly begins its next regular session in January.

Wayne’s plan would update the income tax range to make it fairer. He would raise the tax on people earning more than $75,000, while providing a 15 percent earned income tax credit for many poorer people.

Wayne’s plan also would tax services used mainly by rich people — such as country club dues, aircraft leasing and limousine rental. He also would restore the “death” tax on estates worth more than $1 million.

Farmer’s plan would eliminate personal and company income taxes and cut the sales tax rate from 6 percent to 5.5 percent. It would extend the sales tax to most personal and professional services, including commercial real estate leases. But there would be no sales tax on goods and services that meet basic human needs, such as groceries, housing and medical care.

While I admire the social justice idealism behind Wayne’s plan, I think Farmer’s approach would be better for Kentucky’s future, for many reasons.

Farmer’s plan makes Kentucky more economically competitive with other states. It encourages people to make money and save money. It encourages businesses and financially successful people to come here and stay here, increasing the amount of money that will be spent on taxable goods and services.

Farmer’s plan would be easy for the public to understand. It also would be an easy, cheap and effective way for the state to collect revenue. As the economy grows, tax revenues would grow with it.

It would be important that lawmakers keep such a sales-tax system “pure” — in other words, not exempt some products and services for reasons other than to protect poor people. Otherwise, the special-interest lobbyists will have a field day and the system won’t be fair.

Also, it would be important to remove many existing state taxes and fees that unfairly target — or exempt — certain businesses, products and people.

Another attraction of Farmer’s plan is that, politically, it would seem to stand a better chance of passage. That’s because it would allow politicians to brag that they eliminated income taxes and cut the sales tax rate, too.

Kentucky’s tax system doesn’t need another bandage; it needs major surgery to make this state the healthy, prosperous place Kentuckians deserve. Lawmakers have two realistic approaches from which to choose, and the timing couldn’t be more urgent.

Bourbon industry fighting back on new tax

May 13, 2009

Bill Samuels’ speech to the Bluegrass Hospitality Association was a lot like the Maker’s Mark bourbon his company produces: smooth with a distinct flavor — and a kick.

Samuels talked Wednesday about how Kentucky has a monopoly on making premium bourbon. How it is a growing industry, which has doubled production since 1999. How it directly employs 3,200 people, has made $100 million in capital investment and creates $3 billion in gross state product.

Then he talked about how bourbon is creating a spinoff tourism and hospitality industry with huge growth potential that could rival Scotland’s whisky trail and California’s wine country.

Samuels unveiled a new logo and souvenir passport for the Kentucky Bourbon Trail, a 10-year-old marketing effort that he said has brought millions of tourists to the eight participating distilleries.

Then he delivered the kick.

Samuels blasted state officials, accusing them of trying to kill the bourbon industry with excessive taxes and unfair sales restrictions. And he signaled that the industry will be fighting back.

“We’re not looking for subsidies from our commonwealth,” Samuels said. “But we’re sure as hell not looking to be thrown under the bus.”

The bourbon industry is smarting over the General Assembly’s eleventh-hour move earlier this year to balance the state budget by adding the 6 percent sales tax to alcohol.

On Kentucky Derby weekend, a group of industry players ran full-page newspaper ads in Lexington and Louisville demanding that the governor and legislature reconsider.

“Kentuckians already pay the second-highest taxes on beverage alcohol in the U.S. We say enough is enough,” the ad said. “If you see the governor or one of our legislators during the Derby Season, let them know what you think of their unfair tax policies because it’s time to restore common sense to the Commonwealth.”

The Kentucky Distillers’ Association is working on developing a legislative strategy, President Eric Gregory said. He said the industry wants to make sure it has “a seat at the table” when lawmakers discuss much-needed tax reform.

“There are now seven different taxes on bourbon,” Gregory said. “That’s insane.”

Why is liquor so heavily taxed? Because it’s an easy political mark, especially in a state where many Christian denominations consider drinking a sin. Forty-nine of Kentucky’s 120 counties ban alcohol sales, and an additional 41 counties restrict them. A big reason for that is church folks and their legislators.

“I travel all over the world, and the only place I have ever heard the signature product, the signature industry, referred to as sin is in Kentucky,” Samuels said.

“If the majority of our elected officials believe that what we’re producing is sin, we need to confront it. And if they win, we need to shut all this stuff down, because we wouldn’t want to embarrass them. I would contend that’s an issue that needs to be dealt with. We’ve got to call their hand on it. We’re going to force that issue.”

Last year, Rep. Steve Riggs, a Louisville Democrat, suggested that only “wet” counties should receive the benefits of future alcohol taxes. In a General Assembly dominated by legislators from those mostly rural “dry” counties, the idea went nowhere.

Samuels suggested legislation removing all local-option restrictions and forcing counties that want to ban alcohol sales to vote “dry” again. And, he said, those that did should not get any alcohol tax revenues.

“It was estimated that to do that would have raised twice as much money as adding the tax, which took our product, of this signature industry, to the second-highest in the country,” he said.

State tax receipts on distilled spirits dropped by more than half last month as the new tax took effect. But it’s too early to know if that was because of the tax, the overall economy, or simply because people stocked up before the new tax went into effect.

Samuels had two points to make to the tourism people. One was that the bourbon industry is a major, growing contributor to Kentucky’s economy. The second was that bourbon-related tourism and hospitality has huge growth potential.

“This is the cheapest economic investment that the state could make,” he said of lowering taxes on the bourbon industry. “In my judgment, (bourbon-related tourism) has every bit the potential for being for Central Kentucky what Napa and Sonoma are for California. But if the industry itself is not viable, it has no chance.”