Who benefits from tax cuts in KY? Maybe we should ask some follow-up questions | Opinion

If you’ve ever watched a politician speak before a crowd, one of the first things they’ll tell you is how they voted to cut taxes.

The crowd will applaud and cheer and believe that must be good because more money will stay in their pockets. And it would be good if more money stayed in their pockets.

But rarely does anyone ask the politician if the cuts are helping wealthy people while not doing much for lower income families. Or ask what impact the cuts have on government services like schools and health care.

For example, did you know that $2 of every $3 in state and federal tax breaks over the last decade are going to the wealthiest Kentuckians? Meanwhile, citizens struggling to make ends meet are receiving much less in tax breaks.

During the 2025 General Assembly, lawmakers approved a bill, signed by the governor, reducing the state income tax rate from 4 percent to 3.5 percent starting in 2026. This amounts to $718 million. When combined with two previous tax cuts, there’s $2.15 billion less going into state coffers from income taxes.

According to the Kentucky Center for Economic Policy, these cuts at the state and federal level are providing an “enormous windfall” to the wealthiest Kentuckians.

A report from the center’s Jason Bailey says that nearly 10 years after these reductions began, two-thirds of the cuts – $5.7 billion – are going to the richest 20 percent of Kentuckians. That’s income of $148,500 and more a year.

“The wealthiest 1 percent ($646,000 a year or more) alone receive 20 percent of the cuts, substantially more than the 15 percent received by the bottom 60 percent of Kentucky residents combined,” Bailey wrote. The bottom 60 percent is for those earning $82,800 a year and less.

“The net effect of these tax reductions is to make Kentucky’s already upside-down state and local tax system even more so. Low- and middle-income Kentuckians pay far more of their income in state and local taxes than the wealthy,” according to Bailey.

In a separate report on the tax cuts of 2025, Bailey said the $718 million could have been put into public education, which has suffered from reduced state support over the last 15 years.

The center then calculated upgrades the money could have been used for: teacher raises, reduced class sizes and other needs such as afterschool programs and meals. (The report noted that school districts would have authority on how to spend funds.)

That additional money could mean a 6 percent raise for teachers in Fayette County and another 137 teacher or other certified staff positions.

The other issue hanging over the head of many low income Kentuckians is the impact of the “Big Beautiful Bill” approved in July. They are expected to lead to cuts in food and health programs later in 2026.

The center reported that spending cuts could:

• Make 210,000 Kentuckians uninsured because of a loss of Medicaid coverage.
• Put as many as 35 rural Kentucky hospitals at risk for closure because of cuts in the Medicaid program. 
• Cause reductions for all 562,000 Kentuckians receiving Supplemental Nutrition Assistance Program (SNAP) benefits, with an estimated 50,000 people at risk of losing SNAP entirely.

The cost shift from the federal government to states on SNAP benefits would mean Kentucky would have to come up with funding for the same level of benefits. This will lead to some difficult decisions with education, health care and other pressing matters competing for limited state monies.

When you add in the current federal policy on tariffs, any savings from tax cuts are even more remote. The Yale Budget Lab says the U.S. tariff policies will cost the average American household about $1,800 a year.

When families lose health and food benefits, the tax cut savings have little meaning – they’ll be used up in a month. These families are also hurt when local public schools aren’t adequately funded and staffed.

Meanwhile, wealthy families get wealthier thanks to the tax breaks.

So the next time a politician brags about the tax cuts they’re making, consider pressing them with a few questions.

The answers may not make you clap and cheer.

Gil Lawson is a former journalist who covered state government for The Courier-Journal. He retired from state government and lives in Frankfort. For more information about the Kentucky Center for Economic Policy, visit kypolicy.org