KY Policy Blog

Penny Increase in Sales Tax Would Worsen Tax Fairness and Fail to Fix Long-Term Revenue Problem

By Jason Bailey
December 17, 2012

A couple of legislators have floated the idea of raising the sales tax by one percentage point rather than taking action on a tax reform package. But such a plan would make Kentucky’s tax system less equitable while doing nothing to address the fundamental challenge of long-term revenue growth.

Increasing the sales tax would be a very regressive approach, meaning that it would impact low- and middle-income Kentuckians more than those with higher incomes. Research by the Institute on Taxation and Economic Policy (ITEP) shows that the poorest 20 percent read more

Tax Commission Recommendations Raise Needed Revenue but Include Big Corporate Tax Cut

By Jason Bailey
December 11, 2012

The new plan from the Governor’s Blue Ribbon Tax Reform Commission rightly puts the first priority on raising needed revenue to address Kentucky’s budget challenges. The commission finalized a package that raises approximately $659 million in the first year and closes various holes in the tax code that are limiting the pace of state revenue growth.

The most important changes involve strengthening the individual income tax. After much debate, the commission made the right decision in choosing to maintain a graduated income tax after pressure from some commissioners to move read more

Pension Recommendations Emphasize Employee Sacrifice While Addressing Only Portion of Liability

By Jason Bailey
November 1, 2012

The state’s task force on public pensions heard consultants’ recommendations this week that include several ways to raise employee costs and cut benefits, some of which may not be legal. Yet even if all of the recommendations were to become law they would only reduce a small portion of Kentucky’s unfunded pension liability.

This limited impact and emphasis on employee sacrifice are the results of an approach that includes just one revenue measure (taxing retirement benefits) rather than the kind of broad, long-term revenue plan that is needed to truly read more

Arguments to Cut Income Tax Miss Context and Ignore Tax’s Benefits

By Jason Bailey
October 17, 2012

Those arguing for a shift toward sales taxes and away from income taxes in Kentucky overstate the influence of income taxes on where people live. And they overlook the benefits of income taxes, including how they improve tax fairness and drive long-term revenue growth.

One argument, which comes up in the consultants’ report to the governor’s tax reform commission, concerns location decisions along Kentucky’s border regions. Since close to half of the Kentucky population lives close to a state border, there are more opportunities for individuals to choose which state read more

What Would Kentucky Gain from More Business Tax Cuts?

By Jason Bailey
October 10, 2012

For a state like Kentucky—with high levels of poverty, low wages and too few jobs—a perpetual issue is how government can do more to promote prosperity. For years, the state has focused heavily on reducing business taxes and providing special tax incentives with the hope of attracting industry.

In truth, business tax cuts are not a formula for long-term economic development. Yet a focus on that strategy continues in the recently-released consultants’ report to Governor Beshear’s Blue Ribbon Tax Reform Commission.

The report argues that Kentucky needs to improve its read more

Budget Cuts Lead to Job Losses

By Jason Bailey
June 8, 2012

News of layoffs at the University of Kentucky follows stories of pending job loss at the Fayette County health department. Both announcements can be linked to the 11 rounds of cuts the legislature has made to the state budget, which have reduced funding for many state functions by 15-30 percent or more.

Job growth in the economy remains slow, and budget cuts at all levels are making matters worse. Those cuts are resulting in the direct elimination of jobs—both through layoffs and by agencies and organizations not hiring for open read more

Senior Tax Breaks Don’t Attract Migrants

By Jason Bailey
June 1, 2012

Those arguing for state income tax cuts often claim that such cuts will result in the relocation of large numbers of people from other states, but the economic evidence simply doesn’t support those claims. As a recent survey of the research showed, people don’t migrate much in general, and those that move do so largely for family reasons or because they are attracted by quality of life, housing costs, job opportunities or weather—not taxes.

One variant on this claim is that tax cuts for seniors will make a state a read more

Kentucky’s Adult Education Challenge

By Jason Bailey
April 30, 2012

Education cannot solve all of our economic problems, as the many college-educated young people now unemployed and underemployed can attest. But low levels of educational attainment are an important reason for Kentucky’s economic challenges. A more skilled and educated citizenry is critical to building a Kentucky economy and society that can flourish.

While policy discussions of education often focus on children and traditional-age college students, Kentucky adults ages 25-54 face severe gaps in college attainment that impede state progress and family well-being. Those adults will be participating in the workforce read more

Budget Agreement Affirms Deep Cuts to Core Investments

By Ashley Spalding
April 5, 2012

The 2012-2014 budget bill that passed both the House and Senate late last week is—like the budgets previously proposed this year by the Governor, House and Senate—based primarily on cuts. These cuts will further strain the state’s essential programs and services and prevent critical investments in Kentucky’s future.

The budget bill generally upholds the cuts to 2012 funding levels made in the Governor’s budget, which include:

Across state government: 8.4% Universities and community college system: 6.4% Kentucky Educational Television, libraries and archives, career and technical education: 4.2% Public safety including read more

Report Highlights Kentucky’s Need for More Progressive Income Tax

By Jason Bailey
April 4, 2012

A report released today by the Center on Budget and Policy Priorities (CBPP) shows that income taxes for Kentucky families slightly above the poverty line are among the highest in the nation for that income group.

The report says that in 2011 a two-parent family of four in Kentucky with income of only $28,773 (25 percent above the poverty line) paid $1,021 in state income taxes, an amount higher than any other state.

This dubious distinction is because the legislature has been unwilling to comprehensively reform its income tax to read more