Column by Joe Gallenstein

This week the Kentucky state Senate, led by Senate President David Williams, has actually passed a tax increase. Given the state of our budget, this is not a bad thing, but it is interesting to note that these tax increases, on alcohol and cigarettes, are not the tax modernization that this state needs. Our commonwealth needs tax reform that is long lasting, addresses the structural deficit, and is fair to the members of the commonwealth.

Our state is mired in a structural deficit, caused by a loss of tobacco money, a slowdown in the economy, and the end of our estate tax. The result has been, thanks in large part to the Senate leaders’ refusal to take on real changes our state needs, a cutting in services. We have cut services so much that a sorely needed health facility in Louisville has closed; 54 public defender positions, according to the Department of Public Advocacy, are open because of a lack of funding; tuition has increased; 240 jobs have been cut in higher education; the Natural Resources Department is unable to monitor our air and water effectively; and over 975 jobs, according to the Kentucky School Boards Association, have been cut from our public schools. The result has been that we are failing the poorest members of our society by not providing the services they desperately need.

To add insult to injury, our tax system takes a higher percentage of their incomes. The poorest 20 percent of our state pay nearly 9 percent of their income, and the next poorest 20 percent pay 10 percent of their income. Meanwhile, the richest 1 percent pay just under 6 percent of their income, and the 4 percent below them pay a little over 7 percent. We cannot continue to rely on taxing the poor and must restructure our tax base. We need a tax base that does not depend on keeping people in poverty but provides them the opportunity to work out of poverty, according to a Kentucky Youth Advocates report.

There are a few great ways we can do this. One is to decouple our estate tax from the federal estate tax. This tax would only affect the richest 1 percent of Kentuckians, or roughly 350 individuals, according to Kentucky Youth Advocates. More importantly, there is a one million dollar exemption, and those taxed usually pay well under the tax rate due to the number of exemptions available for this tax. We can begin to make up the over $168 million that our state would have likely received for 5 years, according to a Kentuckians For the Commonwealth (KFTC) report, and guarantee that we can afford to ensure that all Kentuckians get due process.

We can also begin to tax some luxury services that most states already tax. A great place to start would be to tax chartered flights with pilots, landscaping services, limousine services that provide drivers, and membership fees to country clubs. These taxes are on luxury services that are not available for most Kentuckians, and some are honestly unfair. If someone buys their own lawnmower to mow their lawn, they are taxed for the lawnmower and the gas.

However, if someone can afford to pay someone else to do lawn care for them, they do not have to worry about the tax. If someone can afford membership to elite country clubs such as Triple Crown, they are not taxed, but if a family takes a trip to Kentucky Kingdom, they are going to have to pay an additional 6 percent. Should we be burdening the middle and lower classes with these taxes while allowing the rich to have similar services provided for less or no tax?

Our tax problems are not just that so many Kentuckians are not paying their share, but that those who earn the least are paying a bigger percentage of their income. That is why our state needs to create a state earned income tax credit (EITC). An EITC will allow the poorest 350,000 Kentuckians to get the money they need to provide food for their family, a roof over their head, and generate additional spending in our economy, according to a KFTC report.

These people need the relief, and it is unfair that our state has not decided to help them. It is a disappointment that our state has cut their services but not provided them with the opportunity to help themselves in other ways.

I applaud the Senate president for finally realizing we cannot afford to cut our services and education more, and he is finally considering that we may need to raise revenue. I hope he considers more than band-aid measures in fixing our tax system and considers the need to ease the burden on the poorest Kentuckians.