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

Quality schools, access to health services and good medical care, dependable police and fire protection, affordable higher education, environmental protection — all of these are the basic foundations of the strong and vibrant communities that Kentuckians all want, and each is necessary to move Kentucky forward.

The General Assembly, through the structuring of our tax system and budget expenditures, controls the raising of revenue and gives priority to spending 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

A tax system that allows each of us to make appropriate private investments toward the public good is essential to moving Kentucky forward. Unfortunately, Kentucky’s tax system isn’t living up to expectations or need. It doesn’t allow Kentuckians to invest adequately in those foundational structures to move Kentucky forward, 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 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.  Gov. Beshear discovered a $129 million deficit when he took office in December 2007 and ordered 3% cuts across the board.  The news got worse when a $900 million gap revenue shortfall – called a structural deficit – was projected 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.

• 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.

Fair and sensible revenue reforms can move Kentucky forward.  Good solutions are available to strengthen our foundations, to address Kentucky’s revenue crisis, and to make our tax system fairer.  These solutions allow us to create opportunities to move Kentucky forward.  

KFTC and our partners in the Kentucky Economic Justice Alliance (KEJA) worked with Rep. Jim Wayne on the Kentucky Forward Bill. This legislation, House Bill 262 as originally written, would provide 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.  

Current Status

HB 262 was introduced in the House with 11 cosponsors. 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.

Take Action

1. Leave a message for your state senate or representative on the Legislative Message Line (800-372-7181, open 8 a.m. to 4:30 p.m. Monday through Friday).  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 in the original HB 262.
   
   You can also tell them that Kentucky needs legislation to even out the playing field a bit, such as by passing a refundable state Earned Income Tax Credit.  More than 350,000 lower-income working families in Kentucky would benefit from an EITC. 

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.