Kentucky Governor Matt Bevin recently told a business news outlet that he wants to make the commonwealth’s tax code even friendlier toward the wealthy.
On Monday, Gov. Bevin sat down with The Lane Report — a Lexington, Kentucky-based business publication — and shared his plans on reforming Kentucky’s tax code to be overly reliant on the commonwealth’s working-class residents.
“What would an ideal structure look like from my perspective? It would be one in which we are taxing consumption and not production,” Gov. Bevin said. “This would be moving more to a model we see in states like in Texas or Tennessee or others, who are taxing no income but rather the consumption. That’s an ideal approach.”
While Bevin framed his ideal tax system as one that “would not be punitive to those who are creating jobs and creating wealth,” it’s important to read between the lines on who ends up paying the bulk of their income in consumption taxes in states like Tennessee, Texas, and other zero-percent income tax states like Florida, New Hampshire, South Dakota, and Washington state.
According to a 2015 report from the Institute on Taxation and Economic Policy (ITEP), the states Bevin mentioned to the Lane Report, as well as other states that don’t tax income, have the most regressive tax systems in the country — meaning the poor and working-class pay a greater share of their wages in various consumption-based taxes than the rich.
As the below chart shows, the aforementioned states get away with not charging an income tax by gouging the poor and working class through consumption taxes, eating up a double-digit portion of their annual wages. However, the richest one percent contribute just a single-digit percentage of their income.
In Texas, for example, the poorest 20 percent have to pony up 12.5 percent of their income in taxes when accounting for the consumption taxes (e.g. sales tax, grocery tax, vehicle registration fees) they pay each year. Comparatively, the wealthiest one percent of residents contribute just 2.9 percent of their income. Tennessee’s tax structure is similar, with the bottom 20 percent contributing 10.9 percent of their annual income in consumption taxes, and the top one percent paying just three percent of their own:
Coincidentally, perhaps because Kentucky still has a five percent income tax as opposed to states that tax income at zero percent, the commonwealth has a higher per-student spending amount in its public education funding than any other state with a zero percent income tax rate (New Hampshire and Washington state being the lone exceptions).
According to 2016 data compiled by Governing magazine, Kentucky spends an average of $9,863 per student, each year. That’s a higher per-student spending amount than Florida ($8,920), Nevada ($8,960), South Dakota ($9,176), Tennessee ($8,810), and Texas ($9,016). It stands to reason that if Gov. Bevin succeeds in making Kentucky’s tax code more regressive like the states he mentioned in the Lane Report interview, per-student education funding could drop.
Gov. Bevin did not return Grit Post’s calls and text messages to his cell phone as of this writing.
(EDITOR’S NOTE, 5:40 PM, 7/3/18: An earlier version of this article incorrectly stated taxes paid by the poor were a percentage of state tax revenues, rather than a percentage of their own income. We have corrected the error.)
Michael Boone is a freelance journalist and columnist writing about politics, government, race, and media. He graduated from Texas Southern University’s School of Communication, and lives in Houston’s Third Ward.