OUR GOAL:  A tax system that is fair and raises adequate revenues to ensure that we will make adequate investments to move Kentucky forward.

This is an especially hard time for Kentuckians.  Energy prices are going up with the rising costs of coal and natural gas.  Kentucky’s economy is based in manufacturing, and has taken a significant hit from the national recession; more than 7% of our workforce is unemployed.  We have one of the nation's fastest-growing gaps between the rich and the poor. 

Now is not the time to deepen the cuts to the services and programs that we rely on—programs that make higher education affordable, extend health care to people who don’t have it, make sure that struggling families are able to access medications and heat their homes.  Now is the time to strengthen these programs, not cut them. 

The General Assembly, through the structuring of our tax system and budget, controls how much revenue the state raises, and how it priorities investments that can move us forward together as a commonwealth. Kentuckians expect these public investments to generate meaningful public returns — good schools and affordable universities, access to good medical care, effective environmental protection and public safety, reliable transportation.  We should be able to adequately care for our veterans, our elderly, and the disabled. We know that these are the foundations that make our communities strong, and we need to know that our investments in these foundations are adequate.

Problems with our current system

The current recession has exacerbated the budget problems that we have, but it did not cause them.   Unfortunately, Kentucky’s tax system has long shorted Kentuckians by not allowing us to make adequate investments in our state, eroding public trust in what we’re able to accomplish collectively.  We need a tax system that lives up to our potential, our expectations and our need.

We also need a tax system that is fair.  Currently, a family of four earning just above the federal poverty line pays more income taxes in Kentucky than they would in any other state.  We have one of the fastest growing wealth gaps in the nation, and Kentucky’s poverty and deep poverty rates are well above the national average. KFTC believes that Kentucky can have a tax system that raises revenue, and raises it without disproportionately taxing our poorest families.

KFTC members Karen Mattingly and Dana Beasley Brown testifying about the need for tax reform before the House Appropriations and Revenue Committee

Consider the following:

• There isn’t enough money to meet the critical needs of our state.   In late 2007, the Consensus Forecasting Group projected a $900 million gap revenue shortfall – called a structural deficit – for the next biennium budget. Despite this, the General Assembly refused to provide any new revenue in the two-year budget approved in April 2008, resulting in significant cuts in education, environmental protection, mine safety, mental health, and many other services important to the quality of life in Kentucky.  Add to this the effects of the economic recession, and we now have a shortfall for this fiscal year, which ends in July, of $454 million.

• Kentucky sends the highest state income tax bill in the nation to families earning just above federal poverty line.

• The more you earn in Kentucky, the less you pay in state and local taxes as a percentage of your income. Kentuckians who earn roughly $7 to $12 dollars an hour pay a full 10% of their income in state and local taxes, the highest of any income group. But if your income is $300,000 you pay less than 6% of your income!

Kentucky doesn’t suffer from a lack of good people or ideas. We have these problems because we haven’t had political leadership willing to allow us to invest in our institutions and people.
Good solutions are available to strengthen our foundations, to address Kentucky’s revenue crisis, and to make our tax system fairer.

History

In 2008 KFTC and a network of allies and supporters worked with Rep. Jim Wayne on the Kentucky Forward Bill. This legislation, House Bill 262 as originally written, called for new investments worth about $250 million in Kentucky’s schools, universities and other public structures, while asking about $89 million less from working families earning less than about $40,000 a year. 

HB 262 was introduced in the House with 11 co-sponsors. Testimony on HB 262 was heard before the Gaming Task Force on January 22.

Two parts of this bill, the estate tax and the state Earned Income Tax Credit (EITC) were pulled out into another bill, HB 566, which was approved by the House Appropriations and Revenue Committee on Feb. 28.  But then House Democratic leaders let the bill die on the floor, refusing to call it for a vote.

A modified version of HB 262, that still included the extension of the sales tax to a limited number of services and added a 25-cent per pack cigarette tax increase, passed out of the House with a vote of 50-45. But the Senate completely re-wrote the bill, changing it to become about $44 million in tax breaks for movie producers and other limited interests. The House refused to go along with these changes and HB 262 died.

Current Status

In the 2009 General Assembly, House Bill 223 has 12 co-sponsors and has been assigned to the House Appropriations and Revenue Committee.  It is the same as the original HB 262 in 2008. A separate bill, House Bill 257, would establish the EITC and pay for it with a restored estate tax.

Take Action

1. Leave a message for your state senator or representative on the Legislative Message Line (800-372-7181, open 7 a.m. to 11 p.m. Mondays thru Thursdays, 7 a.m. - 6 p.m. on Fridays).  Encourage them to invest in education, health care, higher ed, and public safety by supporting revenue measures that are fair, sensible, and sustainable like the proposals offered by Rep. Jim Wayne in House Bill 223.

2. Become a member of KFTC or donate above your yearly dues.  As a grassroots organization, our strength lies in our membership.  Each new member gives us more clout in Frankfort, and your donations allow us to be the most active grassroots lobbying group in the state.