Given the difficult economy the nation has seen in recent months, and the efforts by government to get it moving forward again, 2009 may long be remembered as the year of incentives.
Here in Kentucky, the General Assembly has authorized or expanded several programs, both temporary and long-term, that reward those looking to trade in their vehicle for a new one, purchase a newly constructed home, renovate a private historic site, or invest in their business. Other tax incentives make Kentucky more attractive to our men and women in uniform; the film and television industry; the Breeders Cup; and NASCAR.
Both of the incentive packages for new home and car buyers will run for a year. The first of those will benefit current homeowners who buy and then occupy a newly constructed home for a minimum of two years; this program began late last month and runs through next July. This income-tax credit, worth up to $5,000, is capped at $25 million, but the state’s budget officials believe the actual impact to state government will be around $20 million.
Legislators created this incentive to complement a temporary federal incentive plan targeted at home buyers making their first purchase; it also should help clear a backlog of newly constructed but empty homes across the state. More information can be found at the Revenue Cabinet’s website, www.revenue.ky.gov.
The savings for home buyers will be realized at tax time, but new-car buyers who have a trade-in will benefit at the time of the sale, starting September 1st and running through August 2010. During that year, those making the purchase will get a credit for the value of their trade-in when it comes time to pay the 6 percent motor vehicle usage tax.
Here’s how it works: If you buy a vehicle worth $20,000, and your trade-in is valued at $10,000 by the dealer, you will only pay the usage tax on the difference instead of the full price. In this case, you’ll pay $600 rather than $1,200. This is capped at $25 million and will also be available on a first-come-first-serve basis.
As we wait to see how effective these two programs are for families, it appears our plan to lure the film, television and touring-production industry to Kentucky is already paying off. Last week, we learned that a major motion picture centered on the horse Secretariat will be filmed at least in part here.
This program mirrors what many other states are doing, but ensures that it does not become a financial drain as it has in other places. The incentives, for example, are only available for the work done here. There are other financial guidelines and qualifications as well.
For the business community, several incentive packages that had become dated are now streamlined into one that should make us more competitive with other states.
Small businesses that hire and then retain at least one new employee for a year and invest at least $5,000 are also eligible for tax breaks, as are larger manufacturers who invest at least $2.5 million in new equipment and training.
Historic property owners won’t see many technical changes in the program that rewards them for their preservation efforts, but the funding will increase from $3 million to $5 million.
We also expect to see substantial growth in the number of military personnel calling Kentucky home, since we have exempted their active-duty pay from the state income tax, beginning in January. This, too, makes us much more competitive with other states that have already taken this step.
The owners of the Kentucky Speedway are now a step closer to hosting a NASCAR Sprint Cup race, thanks to an expansion of the 13-year-old law designed to bring large and unique tourist attractions to the state. Kentucky is also in better position to host the Breeders Cup horse race more often beyond the 2010 race at Churchill Downs.
These incentives are one prong of the state’s effort to move the economy forward, and they complement the hundreds of millions of dollars we have set aside this year for such things as our schools and highways.
Time will tell how effective these investments are, but taken together, I think they have the potential to be the kind of boost we need.
As always, please feel free to contact me if you have any thoughts about this or any other state government issue. My address is Room 366B, Capitol Annex, 702 Capitol Avenue, Frankfort, KY 40601.
You can also leave a message for me or for any legislator at 800-372-7181. For the deaf or hard of hearing, the number is 800-896-0305.
I hope to hear from you soon.