By Karen Gutierrez
The Cincinnati Enquirer

Gov. Ernie Fletcher said Tuesday he will likely veto all or parts of a state budget that doesn't include his plan for changing Kentucky's tax system.

Legislators have a week to resolve differences between Republican- and Democrat-backed spending plans in the House and Senate. The General Assembly must vote on a budget April 12 or 13. At that point, no time will remain for a legislative override of any vetoes.

FLETCHER ON TV

Gov. Ernie Fletcher wants to take his case for overhauling the state's tax code before a statewide television audience Thursday evening, his spokeswoman said Tuesday. Fletcher is planning a 15-minute televised address from his Frankfort office Thursday about 5:30 p.m., Fletcher spokeswoman Jeannie Lausche said. It is still uncertain which stations will air the speech, Lausche said. Fletcher is offering television stations the opportunity to carry the broadcast live.

The Republican governor's remarks came after a warmly received speech at Northern Kentucky University, which stands to get at least $42 million for a special events center under Fletcher's plan. That project and others may be in jeopardy if no budget agreement is reached.

Fletcher's tax plan is a major sticking point. All 16 Senate Democrats refused to vote on it, while all 22 Republicans approved it.

The Democrat-controlled House rejected Fletcher's plan. Its budget increases spending, which Fletcher contends aren't affordable without a new tax structure that makes Kentucky more inviting to business.

His plan offsets tax increases with tax cuts, making it "revenue neutral," he says. It includes:

• Raising the cigarette tax from the current 3 cents to 29 cents a pack. Revenue gained over two years: $320 million.

• Cutting the personal income tax rate from 6 percent to 5.7 percent and eliminating taxes for people making less than $12,000 a year. (Kentuckians currently pay on any income over $4,000.) Revenue lost: $243 million.

• Cutting the top corporate income tax rate from 8.25 percent to 6 percent. Revenue lost: $94 million.

• Applying the corporate tax to more corporations. Revenue gained: $211 million.

• Eliminating a tax on corporate licenses. Revenue lost: $215 million.

The plan creates a fairer system and will lead to at least 7,000 new jobs in its first year, Fletcher says.

But opponents, such as a social-service group called Kentucky Youth Advocates, argue that the plan does more for corporations than individuals. Cigarette taxes affect low-income people more than others - so much so that the 26-cent increase outweighs Fletcher's income-tax cut, says Matt Gardner of the Institute on Taxation and Economic Policy, which analyzed the plan for Kentucky Youth Advocates.

Fletcher is the first governor to fully recognize NKU's mistreatment in Frankfort over the years, said Rep. Jon Draud, R-Crestview Hills.

"I think Gov. Fletcher realizes this region can become an economic engine," Draud said.

E-mail kgutierrez@enquirer.com