Kentucky zapped for taxing poor people

A left-leaning Washington D.C. think tank, Center on Budget and Policy Priorities(CBPP), has found that Kentucky has the highest income tax in the nation on a family of four at 125% of the poverty level.

CBPP reports a two-parent family of four in Kentucky with $26,504 in 2007 income would owe state income tax of $923. This is effectively a transfer of the federal Earned Income Tax Credit to Kentucky’s general fund.

The report lists Kentucky as one of only eighteen states that hits two-parent families of four with any income tax at all.

Rep. Bill Farmer (R-Lexington) has announced plans to file a bill for the 2009 General Assembly to eliminate Kentucky’s income tax and replace it with consumption taxes.


  1. Anonymous says:

    So, faced with a simple problem– KY’s income tax hits poor people–Farmer’s solution is to repeal the entire tax and replace it with a new tax on consumption? Does this guy buy a new car every time he gets a flat tire? Seems like a smarter solution would be just increasing the income tax filing threshold…

  2. I think that the decision is right. Because poor people must not be taxed for any reason. So, the best thing is to avoid taxing poor peoples.

    Jack roberts

    kentucky drug rehab

  3. Gary D. McCollum says:

    Anonymous–“increasing the income tax filing threshold” simply lets lower income earners off the hook entirely and forces Kentucky’s higher income earners (which is proportionally smaller than in most states) to absorb those costs (absent a dip in spending by our legislature to make up for the deficiency). With all due respect, that would harm–rather than help–Kentucky’s economy and inevitably would lead to MORE poor people below the new, “higher” income tax filing threshold you suggest. Higher income earners would move to states, like Tennessee, to escape the income tax and we would be worse off.

    Jack–I sense sarcasm, but the goal in selling this tax policy change is to institute a more fair tax across the board. Higher income earners are still being taxed (because the more you earn the more you spend), while low income earners are still being taxed, but based on their consumption–encouraging them to save, but still work hard.

    This proposal makes a great deal of sense.

  4. This plan was announced on Leland Conway’s show today. Not much detail. I think it’s basically a 5% sales and services tax.

    I’d be surprised if that low a rate would replace all the income tax revenue. And if it isn’t “revenue neutral” then I can’t say it has any chance of ever passing. But I haven’t seen any numbers or details.

    Hopefully it can get a serious discussion started.

  5. Eliminating the many exclusions to the state sales tax alone will generate a lot of money.

  6. The best thing about eliminating state personal and business income taxes will be the influx of new businesses and jobs to the state. This will help us “poor people” the most.

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