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“Good Tax Policy Advice: After the Beauty Queen, Bluegrass, and Bourbon”

Thomson Reuters David Brunori

I had the honor and privilege to speak before the Kentucky Interim Joint Committee on Appropriations and Revenue recently. The topic was tax reform. And the legislators to whom I spoke were among the most engaging I have encountered. Before I tell you what I told the members of the committee, I want to note a few things. First, the committee met at the Kentucky state fair. Not many tax reform committees meet at the state fair. Usually, they are in some nondescript meeting room in a legislative chamber.

But we were talking taxes in the middle of one of the world's great fairs–with music, rides, beef cattle contests, corn dogs and other fried delicacies. In fact, one largest horse shows (and they know a thing or horses in Kentucky) was going on while we were meeting. Before the committee met, the members gathered at a century old ham breakfast where they auctioned a hog off for charity. Miss Kentucky did the honors–and then came to the meeting! Dear readers: how many of you can say that a state beauty queen graced a tax reform meeting with her presence? None.

The second thing you should know is that Kentucky is full of bourbon. And, for a guy who spends his time in Washington, DC, the bourbon in Kentucky is cheap. I love bourbon. The greatest gift I ever received (apart I guess from the births of my children) was a bottle of Pappy van Winkle from the best tax lawyer in Kentucky. Pappy is gone and now I am drinking Blantons which is not too bad. Anyway, the three best t-shirts I saw in Kentucky were bourbon related. A very, very old guy sporting a WWII veteran's cap had a shirt that said "whiskey makes me frisky." Another shirt simply said "Bourbon is a vegetable." But my favorite was a shirt that said "Kentucky Fast Horses, Beautiful Women, Smooth Bourbon." I saw similar t-shirts again and I swear the adjectives were switched.

In any event, if you ever get a chance, go the Kentucky state fair. It is a whole lot of fun. And Kentucky may have the nicest people in the country.

What I told the committee is what I would tell any state seeking advice on how to reform its tax system, particularly with respect to business taxation. First, I reminded everyone that businesses do not pay taxes. Astonishingly, many politicians do not seem to understand that. But every tax you levy on a "business" is actually paid by a human being. Owners, workers, customers–some person who eats, drinks, and watches Game of Thrones is paying.

Second, I reminded the good legislators that it is nearly impossible for a state to effectively tax mobile capital in a global economy. Indeed, it is hard for national governments to tax mobile capital. No matter how much some may wish it not true, there will always be that pesky state or Caribbean Island nation letting you park your assets tax free.


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Originally published in Thomson Reuters and is reproduced here with permission, September 6, 2017