Kentucky Legislature Passed A Tax Hike For 95% Of Kentuckians-- But At Least The Rich Get Cuts

Beshear and Bevin

A Democratic campaign operative friend of mine does so well that he generally gets to pick any race he wants to run and he can avoid races that have been infiltrated-- even body-snatched-- by the DCCC or EMILY’s List. And unlike them, he wins, even in long shot match-ups. He loves Kentucky-- it must be the bourbon-- and he may run Andy Beshear’s campaign for governor in 2020. Lucky for him-- and Beshear-- the Republican-dominated state legislature just handed the Democrats a winning issue. The new tax cut they passed on this week and sent to the Republican governor, Matt Bevin, Thursday reduces taxes for the rich and races it for the bottom 95%. Jeff Stein reported some reticence on the part of a wary Bevin:

The proposal arrives on the Republican governor's desk at a charged moment in Kentucky politics: The bill flew through the legislature on short notice, and thousands of teachers went to the State Capitol building earlier this week to protest cuts to their pension system.

Bevin's position on the tax overhaul, Kentucky's biggest in more than a decade, remains unknown. He said in a statement that the bill and the state budget, which was also passed by the legislature and is awaiting his signature, may not be “fiscally responsible.” Bevin has until April 13 to sign or veto the bill or send it back to the legislature with modifications.

The plan would flatten Kentucky's corporate and personal income-tax rates, setting both at 5 percent. Currently, Kentucky's corporate tax rate runs between 4 and 6 percent, while its income-tax rate ranges from 2 to 6 percent. The new flat rate of 5 percent for everyone means that small companies and Kentuckians with below-average incomes will face tax hikes, and higher earners will get tax cuts.

The bill attempts to make up for those cuts by nearly doubling the cigarette tax and imposing sales taxes on 17 additional services, including landscaping, janitorial work, golf courses and pet grooming. The state's nonpartisan legislative staff estimated the plan will, on net, raise money, although other experts are skeptical.

Residents of Kentucky, like everyone else in the country, are also affected by the federal GOP tax law passed in December. The Kentucky plan shares some characteristics of that overhaul, including the proposal to lower taxes faced by some businesses. But in contrast with the congressional GOP effort, Kentucky Republicans are aiming to avoid dramatically increasing the deficit.

That is one reason the Kentucky plan includes an expansion of the sales tax, which is expected to hit most state residents. Overall, the plan would give an average $7,000 tax cut to the richest 1 percent of Kentuckians, who average more than $1 million of annual income, according to a report released Wednesday by the nonpartisan Kentucky Center for Economic Policy. But 95 percent of the state's taxpayers would see a tax increase, and those earning between $55,000 and $92,000 a year would face the largest tax increases-- about $213 a year, the analysis found.

Meanwhile, someone earning $8 million a year-- such as John Calipari, the head coach of the University of Kentucky men's basketball team-- would receive a tax cut of close to $80,000 a year, said Jason Bailey, the executive director of the center. As a share of their income, the poorest Kentucky residents would face the biggest tax hikes, in part because of the increase in the cigarette tax, according to Bailey.

The plan would generate an additional $239 million in state revenue in 2019 and an extra $248 million in 2020, according to the legislature's nonpartisan scorekeeper.