KY Policy Blog

New Report Shows Cause for Concern Over High Income Inequality in Kentucky

By Anna Baumann
June 16, 2016

The top one percent of earners in Kentucky have taken home one-fourth of all income growth in the recovery from the Great Recession, continuing a decades-long trend of rising income inequality in the Commonwealth and across the nation. A new report from the Economic Policy Institute measures this trend at the national, regional, state and local level, showing, for instance, that while real income for the wealthiest 1 percent of Kentuckians rose by 60.1 percent between 1979 and 2013 (the last year for which data are available), it dropped by 2.6 percent for everyone else.

Prior to 1979, in the half-century following the Great Depression, states and the country as a whole experienced greater equality of incomes. By 1979, the top 1 percent’s share of all income in Kentucky had fallen from its 1929 peak of 19.9 percent to 9.3 percent. But today, that share has climbed back up to 14.1 percent.

Even though Kentucky is a relatively poor state, where the average income of the top 1 percent is just over half of the US average, it is clear from the data that those at the top are still disproportionately benefitting from growth in our economy. The report’s data show:

  • In 1979, the top 1 percent of Kentuckians made 10.1 times what everyone else made, but by 2013 that ratio had risen to 16.6.
  • The average income for the top 1 percent in Kentucky is $619,585, while for everyone else is $37,371.
  • In Kentucky’s most unequal county, Kenton County, the top 1 percent makes 21.9 times more than everyone else. Robertson County has the lowest ratio with the top 1 percent making 5.9 times what everyone else makes (the average income of the bottom 99 percent is $26,076). Click here for a map of income inequality across Kentucky’s counties.

The numbers are stark, and reason for concern. With more income accruing to those at the top and less to everyone else including the middle class, the social ills of relative poverty, the likely reduction in economic mobility, and the drag on consumer demand cast a shadow on economic growth and on the American dream. Strategies to combat growing income inequality include:

  • Federal and state tax reform that cleans up tax breaks benefiting the wealthy; restores estate taxes to mitigate concentration of wealth; and generates new revenue to invest in education, health, infrastructure and other important foundations of economic opportunity.
  • Policies to spur stronger wage growth across the bottom and the middle including immediate investment in areas like infrastructure to get the economy to full employment, a higher minimum wage, the new overtime threshold and policies that strengthen workers’ ability to bargain collectively through unions.

If Kentucky is to bridge the growing funding gaps between rich and poor public school districts, make college more affordable, protect health care access and generally strengthen rungs on the economic ladder, state tax reform must be a priority. In contrast, the bad tax fad idea of cutting income taxes and moving to a consumption based model would make inequality worse by further cutting taxes for those at the top while shifting responsibility to everyone else. Kentucky already has a state and local tax system that exacerbates income inequality, with the top 1 percent paying 6.0 percent of their income in state and local taxes, and the middle 20 percent paying 10.8 percent.

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