The tax system in the United States is mostly progressive, meaning that typically people with more money pay a higher tax rate. That’s not true in Kentucky, where the highest tax rate is paid by the middle 20 percent of Kentuckians.
Findings in a new study from the Institute on Taxation and Economic Policy show that middle-class Kentuckians making around $40,000 per year pay a tax rate of 11.1 percent, while the richest pay a mere 6.7 percent. This means the middle class are paying 167 percent the rate that the richest Kentuckians pay.
But that’s not all. The top five percent of earners in Kentucky pay rates lower than the lowest twenty percent. What this means is that Kentuckians making $10,000 per year pay a higher percentage of their income than ones making over $238,000 per year.
“The wealthiest Kentuckians benefit the most from our growing economy, and by a widening margin,” said Kentucky Center for Economic Policy senior policy analyst Anna Baumann. “It would be reasonable for them to pay a little more in taxes, according to their ability, for the investments that benefit us all. But instead, we have been cutting their taxes, cutting investments in our schools and community based services, and leaning more heavily on middle- and low-income Kentuckians.”
This tax structure naturally fuels income inequality. While the wealthiest percent of Kentuckians makes 94 times the poorest 20 percent before taxes, after taxes that disparity increases to 96 times. The effect, therefore, is using tax policy to redistribute wealth from the poorest to the richest.
And Governor Matt Bevin (R) wants to double down on taxing the poor. Bevin doesn’t want an income tax at all, instead he wants a consumption tax, where taxes are levied when money is spent. Since the poor spend a higher percentage of their income than the rich, this translates to a regressive tax structure.
Bevin called this regressive tax structure “the ideal approach”.
Bevin and Kentucky Republicans have successfully changed much of Kentucky’s tax code toward the regressive sales tax model and further flattened the income tax’s structure, meaning the effect of pulling more funding from the poor and fueling income inequality will likely continue to grow.
Katelyn Kivel is a contributing editor and senior legal reporter for Grit Post in Kalamazoo, Michigan. Follow her on Twitter @KatelynKivel.