Report: Richest 0.1% of Kentuckians Hold Staggering $275 Billion in Wealth

• A nationwide tax of 2 percent on wealth over $30 million could have raised nearly $414 billion if it were in effect this year, including $2.8 billion from extremely wealthy Kentuckians.
• This tax would affect just 1 in 1,000 households in Kentucky, or 0.1 percent of the population. Nationally it would affect 0.25 percent of the population.
• Ninety-two percent of extreme wealth is owned by white, non-Hispanic families.
• A large share of Kentucky’s extreme wealth – 44 percent – is held in the form of unrealized capital gains, meaning investment income on which these families have yet to pay tax (and may never pay tax under current law). Nationally, this share is 43 percent.
• A tax on the stock of unrealized gains in 2022 could be expected to raise between $529 billion and $3.9 trillion nationally depending on the tax rate chosen and the percentage of gains deemed to be realized. This includes between $4 billion and $30 billion from extremely wealthy Kentuckians. The report models six different policy options for taxing unrealized gains.

In addition to a wealth tax or a tax on unrealized capital gains as outlined above, the report identifies other ways to strengthen the federal taxation of extremely wealthy people, including:

• taxing increases in wealth annually as an asset grows (mark-to-market taxation)
• taxing increases in wealth before they are passed on to heirs (ending stepped-up basis)
• eliminating the tax preference that makes tax rates on realized capital gains lower than on income from work
• strengthening the estate tax
• creating an inheritance tax

All of these are viable policy options for lawmakers looking to curb wealth inequality.

Kentucky’s tax code is already overwhelmingly regressive when it comes to income–and is even more lopsided when it comes to wealth. That problem is being made worse by current efforts in the Kentucky General Assembly to reduce or even eliminate the state’s income tax, primarily benefiting the wealthiest 1%. State lawmakers seeking to reverse course and fix the imbalances in our tax code have several readily available options as identified in the report, such as:

• reversing recent reductions in the state’s income tax rate and restoring a graduated income tax with higher tax rates for those at the top
• raising rates on realized capital gains income
• enacting progressive taxation of real estate wealth
• strengthening taxation of corporate profits and
• reinstating Kentucky’s estate tax, which was eliminated in the 2000s, and enhance the inheritance tax

“A very small number of households hold a staggering share of nationwide wealth, and they’ve been able to grow their fortunes in part because our tax system asks very little of them,” said Carl Davis, ITEP’s research director and an author of the report. “New and strengthened taxes on extreme levels of wealth could dramatically reduce the runaway inequality we face today.” 

The Kentucky Center for Economic Policy is a non-profit, non-partisan organization conducting research, analysis and education on important policy issues facing the Commonwealth. For more information, please visit KyPolicy’s website at www.kypolicy.org.

The Institute on Taxation and Economic Policy (ITEP) is a non-profit, non-partisan tax policy organization that conducts rigorous analyses of tax and economic proposals and provides data-driven recommendations on how to shape equitable and sustainable tax systems. ITEP’s expertise and data uniquely enhance federal, state, and local policy debates by revealing how taxes affect both public revenues and people of various levels of income and wealth.