Kentucky Center for Economic Policy: New Tax Law Shifts from the Wealthy to Kentuckians of Color and Economically Distressed Regions of State
ITEP Work in ActionIn the waning days of the 2018 General Assembly, legislators passed House Bill 366 (HB 366), a regressive tax reform package that gives a tax break to the wealthiest but asks more of everyone else, especially low-income Kentuckians. In addition to widening income disparities, these changes will exacerbate existing racial and geographic inequality in our state.
Tax Law Asks More of Lower-Income Families Across the State
As established in previous posts, the new tax law is regressive (another tax bill was passed on the very last day of session with relatively small alterations to HB 366 that does not change its regressive nature). With a flat income tax at 5 percent compared to the current graduated structure with a 6 percent top rate, cigarette tax increase and an expansion of the sales tax to a number of services, the new law represents a shift in our tax system from income taxes to sales and excise or “consumption-based” taxes. In fact, a majority of the revenue raised by HB 366 actually goes to pay for the cost of providing income tax rate cuts disproportionately benefiting the wealthy rather than to invest in the important services like schools and public health that benefit all Kentuckians. Income taxes ask more of the wealthy and consumption taxes depend more on low-income families, so the combination of an income tax cut and sales tax expansion has a regressive impact.