As Kentucky grapples with the news of a potential $1 billion budget shortfall, there are good reasons for state lawmakers to turn to progressive tax reform instead of resorting to painful spending cuts.
Kentucky’s overall tax structure is currently quite regressive, meaning that low-and middle-income families pay more as a share of their income in taxes than do wealthier Kentuckians. In 2007, the poorest 20 percent of Kentucky residents (those with incomes less than $8,000) paid 7.8 percent of their incomes in state and local taxes. The richest 1 percent—–taxpayers with average incomes of $933,100 in 2007—–paid 5.8 percent of their income in Kentucky taxes, after accounting for the federal deductibility of such taxes. Changing the state’s tax structure in a progressive way would ensure that Kentucky taxes are based on the ability of Kentuckians to pay those taxes.