Kentucky is facing a $91 million budget shortfall, and one of the driving factors is a decline in a form of income primarily used by the nation’s wealthiest individuals.
In 2012, the U.S. Congress was preparing to take the country over the “fiscal cliff” over rising debt, rising healthcare costs, and spending on the wars in Iraq and Afghanistan. To reduce the deficit, President Obama proposed raising the federal capital gains tax, which largely impacted the nation's wealthiest, prompting a massive sell-off by 2013.
As a result, state budget forecasters anticipated a repeat of such revenue on what was essentially a one-time occurrence.
“All states knew of this change, and they made adjustments in their revenue estimates, but it was a much larger impact nationwide than states planned for,” said Kentucky State Budget Director Jane Driskell.
Driskell says there is no need for a special legislative session to address the shortfall. Governor Beshear could issue a budget reduction order to balance the state’s coffers.