In discussing principles of taxation and revenue allocation, Kentucky’s Catholic bishops said in a 2004 statement that the state of Kentucky “should seek and maintain revenues sufficient to meet the basic needs of all, especially the poor and vulnerable.”

The bishops added, “Effective stewardship of resources is always of concern to any branch of government, but even the most careful management of resources cannot overcome a fundamental lack of income.”

These words resonate in Kentucky today as the state faces a decline in revenue that has led to a significant budget shortfall. The effects are so severe that budget cuts in practically all areas, including education and social services, are likely during the coming two years. Gov. Steve Beshear proposed such cuts in the 2008-10 budget he presented to the state legislature.

Many Kentuckians will be affected by this belt-tightening as basic services are curtailed.
And as is generally the case in such times, the poor and vulnerable are most affected by this budgetary crisis.

What can be done to minimize the impact of all this?

One answer was proposed last week by the governor: expanding gambling to allow casinos to operate at racetracks and other locations in the state. Beshear proposed having 12 casinos throughout the state, and he estimated that they could generate about $600 million in revenue annually within five years.

This proposal, however, is problematic on several fronts.

Allowing casino gambling would require amending the state Constitution, which voters would have to ultimately approve. But before such a vote can take place, the legislature must pass a proposed amendment — which requires 60 votes in the House and 23 in the Senate. And there is some strong opposition to a proposed amendment, especially in the Senate.

But there also are other questions and concerns about the state venturing into casino gambling.

Is this a reliable and prudent source of state revenue? Is it sound public policy to stake the state’s financial future on revenue from additional forms of gambling, when we already have a state lottery? What are the social costs in terms of adverse effects on families caused by problem gambling and on communities where casinos are located? How much gambling can be sustained in a state or region before the saturation point is reached?

The attraction of casino gambling is obvious: generating more state revenue without having to face the difficult question of raising taxes. But expanded gambling is not the panacea that it appears to be, and it should not be considered a substitute for addressing other revenue sources that are more progressive and more stable.

The casino plan will probably be the main revenue-generating proposal the legislature debates during the current session. But it should not be. There also are other proposals legislators should consider.

For example, the Catholic Conference of Kentucky, the public policy arm of the state’s bishops, is supporting two proposals that also would increase revenue.

One (House Bill 443) would increase the surtax on cigarettes by 70 cents a pack and also increase the tax rates on other tobacco products. The tax of cigarettes is now 30 cents a pack, one of the lowest in the nation.

Raising the tax on cigarettes by 70 cents would produce more than $200 million a year in additional revenue, according to the Campaign for Tobacco Free Kids. And the proposal offers another plus: the potential for reduced smoking, especially among teens.

Another bill (House Bill 262) would increase the state tax rate on income of over $75,000; make changes in the estate tax; and place a sales tax on selected services, such as membership fees in country clubs, golf course green fees, lawn-care services and pest-control services. The bill also would provide a refundable earned income tax credit for the poor.

A fiscal note attached to HB 262 estimates that increasing the tax rate on incomes of over $75,000 would generate between $225 million and $250 million annually in state revenue, and putting a sales tax on selected services would produce about $50 million a year in revenue.

The challenge legislators face in finding new revenue for needed state programs and services is to weigh the various proposals in terms of what benefits the common good. Sometimes what benefits the common good is not what is the most popular but what is the wisest and most prudent course to take. Choosing such a course requires courage, but this is what public service is about.