According to ITEP, replacing all of Kentucky’s income tax revenue with sales tax revenue would require an increase in our sales tax rate to 13.3 percent – more than double the current 6 percent rate and by far the highest state sales tax rate in the country (next highest is California at 7.5 percent). But since a shift would slow revenue growth, the initially revenue-neutral impact would become increasingly negative over time, leaving legislators to choose between raising the sales tax rate even higher, increasing other taxes and/or cutting funding for schools, child welfare and other investments. In states that have experimented with tax-shifting, income tax cuts have not paid for themselves, but have led to education funding cuts, credit rating downgrades, and the need to raise other revenue sources.
May 22, 2017
Kentucky Center for Economic Policy: Any Way You Slice It, A Shift To Consumption Taxes Will Hurt Kentucky
Institute on Taxation
and Economic Policy
ITEP is a non-profit, non-partisan tax policy organization. We conduct rigorous analyses of tax and economic proposals and provide data-driven recommendations to shape equitable and sustainable tax systems.
Subscribe to ITEP Emails
Tax research and policy news in your inbox.
Promote Fair Tax Policy
Your gift to ITEP promotes tax justice. With your help, we do research that supports taxing millionaires and billionaires, taxing big corporations and raising revenue for the things our people, our communities and our planet need.
Together, we can create a country with more economic justice, more racial justice, more climate justice… and more tax justice.