Tax Reform that Invests in Thriving Communities www.KentuckyTogether.org Tax Reform that Invests in Thriving Communities Coalition of 35 organizations Public Education Campaign online and social media Promotes opportunity we have to invest in our Commonwealth by raising more revenue through cleaning up the tax code April 1, 2017

State Budget Funds Key Public Systems Education Early childhood education/child care K-12 education Higher education Arts and heritage Health care Health care for poor, children, people with disabilities, elderly in nursing homes Public health Human services & supports Child and domestic violence protection Foster care & adoption Infrastructure Roads Public transit Water & sewer systems Environmental protection Land conservation Environmental regulation State parks Forest management Home weatherization Public safety & justice Court system State police and prisons Disaster relief Consumer & worker safety regulation Economic & workforce development Small business development Workforce training Tourism Agricultural development

-Tax breaks across all taxes – income, corporate, property -here’s a video that illustrates our opportunity Source: OSBD

Source: KCEP analysis of Office of the State Budget Director, BEA data

Source: Center on Budget and Policy Priorities

Source: KCEP analysis of Office of the State Budget Director data

Many Other Areas Cut Deeply Since 2008 Kentucky Arts Council 47%, KET 30%, Libraries 25% Secretary of State, Attorney General, Auditor 27%-35% Environmental protection 27% Vocational rehabilitation 24% Commission on Human Rights, Women 19%, 25% Nature Preserves Commission, 23% Public health 15% Public defenders 13% Amounts adjusted for inflation through 2018. Source: KCEP analysis of Office of the State Budget Director data

Worst State Credit Ratings 47. Michigan 47. Arizona 47. Kentucky 48. New Jersey 49. California 50. Illinois Source: Pew. 2014

What Does Good Tax Reform Look Like? Limit income tax breaks (deductions, exclusions) & create new bracket and surcharge for higher incomes. Bring services into the sales tax base; connect with consumer economy. Close corporate tax loopholes to reduce tax havens & end ineffective incentives. Freeze property tax cap; allow taxes to grow with economy/property values. Raise tobacco taxes; account for fiscal, economic and human toll. Increase hospital provider tax; get hospitals to chip in for great deal that is the Medicaid Expansion.

What Has Governor Bevin Said He’s Wanted Move from “consumption-based” tax system—shifting from income taxes toward sales taxes Lowering income tax rates Broadening base, but unclear how Other potential specifics: Eliminate inheritance tax Eliminate inventory property tax

“Consumption-Based” Doesn’t Work Asks low and middle income Kentuckians to pay for tax cuts for those at the top Weaken revenue growth over time

We already have an Upside Down Tax Code

State and Local Taxes Are Upside Down Those at the Bottom and Middle Pay More as a Share of Family Income Than Those at the Top We’re upside down, which most Kentuckians would say is unfair. We’re also missing out on capturing where all the income growth has been… Source: Institute on Taxation and Economic Policy

So in sum… Source: Institute on Taxation and Economic Policy

Lowering Income Tax While Raising Sales Tax: A tax cut for the wealthy and an increase for a majority of Kentuckians We’re upside down, which most Kentuckians would say is unfair. We’re also missing out on capturing where all the income growth has been… -moral choice. Choice is between continuing these tax breaks that end up asking less from those who have more and not funding the programs that help us all. That support the people that you support. That creates an education system that fosters an educated workforce in the Commonwealth now and far into the future. Shift 25% of income tax to sales tax Source: Institute on Taxation and Economic Policy

Lowering Income Tax While Raising Sales Tax: A tax cut for the wealthy and an increase for a majority of Kentuckians We’re upside down, which most Kentuckians would say is unfair. We’re also missing out on capturing where all the income growth has been… -moral choice. Choice is between continuing these tax breaks that end up asking less from those who have more and not funding the programs that help us all. That support the people that you support. That creates an education system that fosters an educated workforce in the Commonwealth now and far into the future. Flat income tax of 4.1% no deductions, eliminate pension exclusion, sales tax on groceries Source: Institute on Taxation and Economic Policy

Shift from Income Taxes, Slow Revenue Growth Could mean we have to keep increasing sales taxes. Source: KCEP analysis of OSBD data

Could mean we have to keep increasing sales taxes.

It Doesn’t Work!

Results in Other States

The Great Tax Shift Experiment

Who’s Shaping Kentucky’s Plan?

Results in Other States Kansas has raised the sales tax rate twice since income tax cuts were enacted in 2012. North Carolina’s sales tax expansions have paid for only about 40% of $2.5 billion in revenue losses since income tax cuts were enacted in 2013. Ohio Gov. John Kasich, after the state has been cutting income taxes since 2005, announced this year that there would be a budget shortfall and economic slowdowns. Tennessee has raised its sales tax rate by almost a penny a decade since 1970.

Find Out More www.KentuckyTogether.org Kentucky Together @ky_together Jason Bailey www.kypolicy.org jbailey@kypolicy.org Here’s how you can see more from Kentucky Together If you’d like to join the email list, provide your email address