August 22, 2018

Kentucky Center for Economic Policy: Clean Up the Tax Code to Invest in Our Commonwealth

ITEP Work in Action

To move our tax code in the right direction, Kentucky should rejoin 32 other states with a graduated income tax based on ability to pay. Income below $37,500 single/$75,000 married should still be taxed at 5 percent, between that point and $75,000 single/$150,000 married at 6 percent and above those incomes at 7 percent, phasing out the lower rates for filers with taxable income of more than $200,000. The state should also cap the amount of deductions filers can take at 2.5 times their standard deduction, and phase out the retirement income exclusion and the standard deduction for wealthier filers. To offset rate increases for low- and middle-income Kentuckians, preserve the value of the standard deduction and hold married couples harmless, the standard deduction should be increased to $4,000, doubled for married filers and indexed to inflation. These changes combined would raise over $700 million and hold the bottom 60 percent of Kentuckians harmless on average, ask the next 20 percent to chip in just $68 more a year while requiring more of the wealthiest 20 percent who have received enormous state and federal tax cuts.

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