Kentuckians say state income tax cuts aren’t helping; wealthy need to do more | Opinion

In recent years, the Kentucky General Assembly has prioritized the gradual elimination of the state budget’s largest revenue source, the individual income tax. The income tax rate was 5% before 2022 but will drop another half percentage point to 3.5% on Jan. 1.

Yet a new poll from Change Research finds that only 9% of Kentuckians say these income tax cuts are helping them. In contrast, 8% say the tax cuts have actually hurt, 40% say they haven’t affected them and 43% say they are not sure.

Few say they are benefitting from these cuts even though they come with an enormous price tag. The cost of dropping the income tax rate from 5% to 3.5% is a stunning $2.1 billion annually, or more than Kentucky spends on base funding for its K-12 schools.

For such a cost, shouldn’t more than 9% of Kentuckians say they are better off as a result? A look at who benefits from the tax cuts explains these poll results.

An estimated 67% of state income tax cuts go the wealthiest 20% of Kentuckians, according to analysis by the Institute on Taxation and Economic Policy. More go to richest 1%, who make $1.6 million a year on average, than the bottom 60%, who earn $52,000 a year and below.

For working class Kentuckians, each half-point income tax cut may be enough to pay for one oil change or phone bill. But when the price of groceries, housing, electricity and more are climbing while wages are falling behind, these tax cuts are hardly noticeable.

The Change Research poll, which surveyed a random sample of 2,079 Kentuckians with a margin of error of +/- 2.2%, also asked whether tax cuts should be the legislature’s biggest concern. Only 28% of respondents said lawmakers should focus on “reducing taxes for everyone, even if most of the benefits go to the wealthy,” while 72% said legislators should focus instead on “improving schools, improving healthcare, and bringing down the cost of living.”

And the poll shows people want legislators to go even further. Kentuckians overwhelmingly support raising taxes on the wealthy to fund vital public investments.

The poll noted that the state doesn’t expect to bring in enough money to cover its costs over the next couple of years and asked where lawmakers should focus to close the gap. A resounding 69% of people said they should “generate more revenue by raising taxes on the wealthy” while only 31% said they should focus on “making cuts to schools, health care, and other public services.”

More specifically, the poll looked at public support for taxing the huge windfall the wealthy have received from both the legislature’s income tax reductions and the massive federal tax cuts recently passed by Congress. After hearing that the richest 5% of Kentuckians are now receiving $3.4 billion annually from a decade of federal and state tax cuts, 67% of respondents support a Settle Up Tax on the wealthy to help improve schools, healthcare and other public services. Only 26% oppose it.

And support is incredibly high for investments that address the cost of living paid for with a tax on the richest 5%:

• 75% of Kentuckians support a state child tax credit of $1,000 per child to help families support the costs of raising kids, while only 20% oppose;
• 71% support allowing the state to create more affordable health care options like letting people buy into Medicaid coverage and creating cheaper options on Kynect, with 21% opposed;
• 68% support an increase in funding for affordable childcare and an expansion of public preschool, while only 26% oppose;
• 60% support putting funding into the Affordable Housing Trust Fund to build more units of affordable housing, with 33% opposed.

These results suggest a need to rethink legislative priorities. Expensive tax cuts skewed to the wealthy aren’t helping workers and families get by. Kentuckians want real action on affordability and greater support for basic services like schools and healthcare. And they want lawmakers to tax the wealthy more to make that possible.

Jason Bailey is executive director of the Kentucky Center for Economic Policy, www.kypolicy.org.