Lawmakers in Kentucky voted Wednesday to approve a tax bill that would cut taxes by $105 million, mostly for banks in the state.
The Kentucky House and Senate approved the tax changes the same day the upper chamber approved legislation that would cost the state as much as $1 billion, according to the Lexington Herald-Leader, for relief from expanding pension costs to some state universities and quasi-governmental agencies.
With the bill's passage, state legislators will be able to override a possible veto from Kentucky Gov. Matt Bevin (R).
Democrats and Republicans both say the bill would largely benefit smaller community banks in the state.
“It’s more important to think about this as a Kentucky community bank equity act,” Senate Minority Floor Leader Morgan McGarvey (D) told the newspaper.
“This does not apply to the big banks as I understand it. It does not go to a J.P. Morgan Chase or a PNC," he continued. "The way these banks work, these community banks, if you’re a Kentucky chartered bank you’re subject to what is the highest tax rate of any community bank system in the country.”
Lawmakers argued that smaller banks suffered under the state's bank franchise tax due to regulations requiring them to hold higher amounts of capital following the passage of the Dodd-Frank Act.
With the Dodd-Frank regulations, state revenue surged under the bank franchise tax between 2010 and 2011 to about $90 million per year, which state legislators said was causing some smaller banks to leave Kentucky entirely.
“Leading means taking chances,” said House Speaker David Osborne (R), according to the Herald-Leader. “And I will defend the decision to put the bank franchise tax in here, because I will tell you, the people who lost their jobs at the First Community Bank of Prestonsburg are not wealthy millionaires who are reaping the benefits of this tax bill.”
The bill is set to cost the state about $56 million in revenue annually at a time when Kentucky is already struggling to pay down its debts. It now heads to Bevin's desk.
Kentucky's pension debt currently sits at $37 billion, according to the Herald-Leader. The state has also been the site of recent teachers strikes as educators have battled state lawmakers over changes to the state's pension system.