Kentucky Center for Economic Policy: What Good Tax Reform Looks Like

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In contrast, HB 263 would ask more of those at the top and less of low- and middle-income people who currently pay a larger share of their income in taxes. To further help with inequities, the bill would create a state level Earned Income Tax Credit (EITC) – an effective poverty-fighting tool that supports work and helps families afford basic living expenses, pay off debt and invest in education. At 15 percent of the federal EITC, this refundable credit would cost $115 million a year.

Combining the distributional impact of HB 263’s individual income tax changes including the EITC; the expansion of the sales tax base to luxury services; and gas tax, cigarette and “other tobacco products” tax increases shows that HB 263 would make our tax system less upside-down overall even as it generates more revenue for investments that benefit all Kentuckians.

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