KY Policy Blog

Income Tax Cuts No Way to Grow Small Businesses

By Anna Baumann
February 27, 2013

The claim that cutting state income taxes is an effective strategy to help small businesses create jobs is discredited in a new report released by the Center on Budget Policy and Priorities (CBPP).

The report shows that state personal income taxes have an insignificant effect on small business job creation. And by taking resources away from critical services like education, income tax cuts could harm a state’s ability to grow an entrepreneurial economy. CBPP notes that:

Taxable income for small businesses is typically modest enough that even a full repeal read more

Bill Would Be a Step Toward Greater Accountability for Tax Breaks

By Anna Baumann
February 20, 2013

Legislation introduced in the House proposes new reporting requirements for some economic development incentive programs, and is a step in the right direction toward greater scrutiny of these costly financial subsidies.

Kentucky needs better data on the cost-effectiveness of the business tax breaks it awards. A few years ago, the state created an online database that provides information on tax breaks when they are awarded, but provides no follow-up information about the resulting impact. House Bill 242 would require the Cabinet for Economic Development to post online information about the read more

Debt Limit Could Increase Costs for Kentucky

By Jason Bailey
February 13, 2013

A Senate committee approved legislation today to limit debt service (the annual payments made on debt the state owes) in future years to six percent of the state’s revenue. Yet rather than saving money, Senate Bill 10 could end up increasing Kentucky’s costs.

There are two reasons debt payments go up as a share of revenue: 1) the state takes on more debt; and 2) the state takes in less revenue than expected. In the latter case, sagging revenues are usually the result of a recession.

But because interest rates read more

Administration Describes Bleak Outlook for Next Budget without More Revenue

By Jason Bailey
February 5, 2013

In a presentation on the need for tax reform to the joint House and Senate Appropriations and Revenue Committee today, Secretary Mary Lassiter laid out a bleak outlook for the next biennial budget. The still-sluggish economy is likely to mean only modest revenue growth, and new revenue will be eaten up quickly by medical cost inflation, contributions to the pension system to pay previous liabilities and the replacement of one-time dollars used to help fund existing services in the current budget.

Lassiter said that revenue growth is likely to be read more

State Can’t Pay Pension Debt from Natural Revenue Growth without Harming Services

By Jason Bailey
January 3, 2013

One area of consensus on pensions is that the state should begin making the full annual required contribution to the retirement system, which will reduce the long-run costs of paying back the system’s liability. Recently, a couple of Senate leaders have suggested that Kentucky can make that payment starting in 2015 using the natural revenue growth generated by a recovering economy—in other words without raising additional revenue through taxes.

But that approach is unrealistic. There just won’t be enough money to make the payment while also doing justice to Kentucky’s read more

The State of Working Kentucky 2012: Jobs by Industry

By Jason Bailey
December 21, 2012

Kentucky’s economy continues to change, with a decline in manufacturing jobs and a shift toward more jobs in the service sector—a trend that has accelerated with the weak economy of the last few years. These changes have big implications for the job quality of Kentucky workers.

Kentucky experienced growth in manufacturing jobs throughout the 1990s, reaching a peak of 310,000 jobs in the year 2000. For about the last ten years, however, manufacturing jobs have plummeted with Kentucky losing nearly one-third of its factory employment over that period. Job loss read more

The State of Working Kentucky 2012: Race

By Ashley Spalding
December 20, 2012

The weak economy of the last few years has had far-reaching effects, but some groups have been harder hit than others. In particular, African Americans in Kentucky have suffered enormous job losses and continue to face a daunting labor market.

Over the last decade, unemployment for white Kentuckians remained consistently just below the state unemployment rate, while unemployment for African Americans was substantially higher—particularly toward the end of the decade. For whites, unemployment grew from 4.9 percent in 2001 to 10.1 percent in 2009, before dropping to 8.9 percent in read more

The State of Working Kentucky 2012: Education

By Ashley Spalding
December 19, 2012

There is no question that greater levels of education are associated with higher wages and employment rates in Kentucky, and employment has been declining among those with less than a college degree in recent years. However, median wages have been stagnant for Kentuckians at all education levels over the last ten years—suggesting that our problems with job quality are more complex than just a skills gap.

Kentucky has seen wage stagnation across the board, but for those with some college or a high school degree, the trend is not new. read more

The State of Working Kentucky 2012: Wages

By Jason Bailey
December 18, 2012

Working Kentuckians have experienced a lost decade in terms of wage growth, a trend that is undermining family economic security across the Commonwealth and will likely persist at least as long as the unemployment rate remains high.

During the last few years of the 1990s and the beginning of the last decade, median wages in both Kentucky and the U. S. climbed considerably. That happened because the nation had practically reached full employment, which by limiting the supply of available workers gave them the ability to obtain somewhat higher wages. read more

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