KY Policy Blog

Despite Good Growth in 2015, Erosion Still Hurting Revenue

By Anna Baumann
August 3, 2015

The good news is Kentucky’s economy grew faster in budget year 2015, and tax revenue grew with it — by $505 million, or 5.3 percent, compared to budget year 2014. Individual income growth, high corporate profits, increases in consumer spending and a strong stock market contributed to the new revenue.

Nominally, individual income taxes grew the most, by $320 million (8.5 percent). Relatively, corporate income taxes grew the most by 11.2 percent ($53 million). The sales tax also grew by $136 million, or 4.4 percent.

The bad news is erosion read more

Retirement Income Growing Much Faster than Wages, Spelling Trouble for State Revenues

By Jason Bailey
July 14, 2015

Kentucky must begin an active search for revenue options to begin fully paying down our pension debt and make public investments that will move the state forward. One issue that must be on the table is the state’s huge exemption of retirement income from the income tax — especially given that retirement income has been growing in recent years even while the wage income Kentucky does tax has been more sluggish.

From 2007 to 2012 (the latest year available), retirement income from pensions and IRA distributions in Kentucky increased by read more

Road Fund Helped by 2015 Fix but Still Feeling Funding Challenges

By Anna Baumann
July 10, 2015

Kentucky ended budget year 2015 with a $20 million shortfall in Road Fund receipts, meaning slightly less money has come in than what was budgeted to invest in and maintain our transportation network.

Drops in the average wholesale price of gasoline — to which Kentucky’s gas tax is tied — are largely to blame. Taken together, all other Road Fund revenue was essentially flat with 0.3 percent growth, but gas tax receipts fell by 4.0 percent compared to budget year 2014. In dollars, the gas tax generated $35.9 million less read more

Year-End Revenues Highlight Importance of Individual Income Tax

By Jason Bailey
July 10, 2015

Kentucky ended its budget year with General Fund revenues $165.4 million more than anticipated, equaling growth of 5.3 percent from the year before. The individual income tax is the main source of this bit of good news because of its ability to generate revenue from wealthier individuals whose incomes have soared in recent years.

For the year, individual income tax receipts grew 8.5 percent compared to 2014, meaning all other revenue grew by only 3.2 percent. Sixty-three percent of total net new revenue for the year was from the individual read more

April 15 Isn’t Popular, But Taxes Still Important

By Anna Baumann
April 14, 2015

Few people like Tax Day. Filling out forms and mailing off checks doesn’t usually inspire reflection on the bigger purpose of taxes.

Yet most people can agree on the priorities our tax dollars pay for. With them — and through our local, state and federal governments — we invest in good schools and universities, well-kept roads and bridges, social services for vulnerable children and adults, safe and beautiful communities and other public structures essential for shared prosperity in the Commonwealth.

In other words, taxes are a critical tool for doing read more

County, Rural Roads Will Lose Millions Without Gas Tax Freeze

By Anna Baumann
March 24, 2015

The clock is ticking on the 2015 session and legislators have yet to guard Kentucky’s city and county roads and bridges from the consequences of a pending 5.1 cent drop in the motor fuels tax rate. Nearly half of motor fuels revenue that the state collects goes back to local governments — through the County Road Aid (18.3 percent), Municipal Road Aid (7.7 percent) and Rural Secondary Aid (22.2 percent) programs — for building, maintaining and improving the transportation network that our local communities and economies rely on.

The interactive read more

Inaction on Gas Tax Will Drop Rate to Historically Low Levels

By Jason Bailey
March 23, 2015

lf legislators end the 2015 session without preventing the pending 5.1 cent drop in the gas tax, the rate will fall to a level near its historic low over the last three decades, once inflation is taken into account.

That can be seen in the graph below of the Kentucky motor fuels tax since 1986, adjusted for the consumer price index, which reflects what the tax means for a household’s budget. The motor fuels tax didn’t change from 1986 to 2004, meaning its value dropped over that time in inflation-adjusted read more

Local Economies Harmed If Lawmakers Fail to Safeguard Road Fund

By Anna Baumann
March 20, 2015

With just two days left in the 2015 General Assembly, legislators are running out of time to protect the Road Fund from another decrease in the motor fuels tax. On April 1, Kentucky’s gas tax is scheduled to drop from its current rate of 21.2 cents to its statutory floor of 16.1 cents, leaving the state, and especially county, rural and municipal governments, with less revenue to maintain, build and improve Kentucky’s roads and bridges.

On top of a 4.3 cent rate cut the legislature let go into effect in read more

Corporations Shouldn’t Get Pass on Local Option Sales Tax

By Jason Bailey
February 25, 2015

Large, profitable corporations are now saying they shouldn’t have to pay their share if the legislature moves forward with putting a local option sales tax on the ballot, according to an Associated Press story.

The article reports that an organization representing large utility customers such as General Electric and Ford says that businesses could face paying an extra $24 million from the new sales tax on their industrial electricity purchases. The AP cites the Senate majority leader saying that creates a problem for the bill in his chamber and the read more

Map Shows How HB 374’s State EITC Would Help Working Families and Communities Across Kentucky

By Ashley Spalding
February 13, 2015

By closing several corporate tax loopholes, House Bill 374 would enable the state to invest in an Earned Income Tax Credit (EITC) for Kentucky’s working families. The state EITC would be 7.5 percent of the federal EITC, and would build on the established benefits of the federal credit—helping more than 400,000 working Kentuckians better afford necessities and stimulating local economies.

The following interactive map describes the positive impact a state EITC could have on each Kentucky county. Scrolling over a county on the map shows the number and share of read more