Governor Bevin intends to call a special session of the General Assembly this fall to address how our state handles taxes and pensions. His resolve that Kentucky needs more revenue to meet our obligations is commendable.
But we can’t get something for nothing. Instead of cleaning up tax breaks to generate new revenue, Governor Bevin has expressed interest in letting wealthy Kentuckians insert more special breaks into our tax code. “Shifting to a consumption-based tax system” – or from income to sales taxes – is really just about giving big new income tax cuts to people and corporations at the very top and making everyone else pay more.
An upside-down tax plan would exacerbate the worst parts of Kentucky’s tax and budget system.
Shifting to consumption taxes will make our tax system even more upside-down than it already is, where those with more pay less. Today, the wealthiest one percent of Kentuckians pay only six percent of their income in total state and local taxes – the least of any income group.
Such a plan will also lead to more rounds of budget cuts in school funding, services for elderly and disabled Kentuckians, child welfare, libraries and other state investments, and an even harder time meeting pension obligations. That’s because:
- Income tax cuts don’t result in the kind of economic and revenue growth promised: the wealthy save their tax breaks or spend them out of state.
- Income taxes track today’s rapid income growth for people at the top, while sales taxes track low- and middle-income households’ stagnant purchasing power.
And revenue is already failing to keep up with the economy in Kentucky. It would be irresponsible for legislators to slow revenue growth at a time when we’ve already cut programs and services to the bone.
We shouldn’t follow other states down this treacherous path.
States like Kansas, Ohio, Louisiana and Oklahoma that have cut income taxes and increased their reliance on sales taxes are in dire financial straits. Instead of leaping ahead economically, they face lagging revenue growth, large deficits, school funding cuts, credit downgrades and the need to raise taxes.
The Governor is right that we need more revenue, but we need to make the right decisions to put Kentucky back on a path to prosperity.
Your voice is important in the fight for a tax system where everyone chips in for the investments that benefit us all. Learn more about how you can get involved by visiting our Toolkit, and about the difference between an upside-down tax shift and real reform on our Resources page.