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Be careful what you wish for

The wealthiest among us are about to get a tax cut of thousands of dollars. Guess who is going to pay for it?

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Editorial cartoon by Aaron Smith

In an article on WDRB, Monica Harkins reports on the coming tax changes in Kentucky:

KY House Bill 8 passed earlier this year, dropping the state's income tax from 5% to 4.5%. For a person who makes $60,000 salary, they currently give $3,000 in state income taxes. Under the new 4.5% rate, the same person would give $2,700.

But to offset that reduction, lawmakers incorporated 35 different new services into the state's existing 6% sales tax.

Be careful what you wish for!

At a Chamber of Commerce breakfast in Murray, District 1 Sen. Jason Howell (R) recently warned voters by exclaiming that “doing this reduction of the income tax like Tennessee has to be carefully done if at all.” As a practicing attorney, he gave an example of real estate closings.

“In Kentucky the closing cost is around $300, but in Tennessee it rises to about $1900. All transactions will be taxed in a consumption (sales) tax system. If you ask Tennesseans about their new sales tax system, they will say that it has been a tax increase on a variety of levels.”

He followed up with a very sobering comment. “If Kentuckians like the idea of a consumption (sales) tax, it will be inevitable to start paying sales taxes on Food and Medicine.” He added that “for every 1% cut in income taxes, the Commonwealth will lose $1 billion in tax revenue.”

We have Kansas as a template for this experiment. Their foolish mantra was ‘huge tax cuts spur unprecedented growth’ which conned Kansas’ voters.

“[But]Kansas economic growth from their [huge] tax cuts never materialized. Kansas was saddled with an almost instantaneous budget hole, leaving schools and pensions drastically underfunded. Infrastructure repairs were put on hold. And to deal with a $700 million drop in revenue — almost twice what was predicted — Kansas raised its sales tax, hurting all residents, but especially lower income Kansans,” warned Raul Hernandez writing for Yahoo Finance in 2017.

So how will Kentucky’s super majority Republican legislature fill that gap in revenue for education, roads, and infrastructure?

The Kentucky legislature is bound and determined to copy Tennessee come “hell or high water” regardless of the research. Anything that Republicans can tell the public is a tax decrease, the better, even if it is doublespeak.

As we said, be careful what you wish for! Here, from Harkins’s article, is the full list of services that will now come with a 6% sales tax:

  1. Photography and photo finishing
  2. Marketing
  3. Telemarketing
  4. Public opinion and research polling
  5. Lobbying
  6. Executive employee recruitment
  7. Website design and development
  8. Website hosting
  9. Facsimile transmission
  10. Private mailroom
  11. Bodyguard services
  12. Security system monitoring
  13. Private investigation services
  14. Process server services
  15. Repossession of personal property
  16. Personal background check services
  17. Parking services
  18. Road and travel services
  19. Condo time-share exchange services
  20. Short-term rental of space
  21. Social event planning and coordination
  22. Leisure, recreational and athletic instructional services
  23. Recreational camp tuition and fees
  24. Personal fitness training
  25. Massage (non-medical)
  26. Cosmetic surgery
  27. Body modification (piercing, tattoos)
  28. Testing services
  29. Interior decorating and design
  30. Household moving
  31. Specialized design (fashion)
  32. Lapidary services
  33. Labor and services for commercial refrigeration
  34. Labor to repair or alter apparel, footwear, watches, or jewelry
  35. Prewritten computer software access services

Democratic Kentucky Gov. Andy Beshear was critical of the impact of the sales tax increases, writing a two-page veto in April that was then overridden by the Republican supermajority.

Jason Bailey, Executive Director of the Kentucky Center for Economic Policy said “expanding sales taxes is not projected to fill the deficit.”

Bailey continued, “That generates a little bit of revenue, but for every dollar in new revenue that those services taxes will generate, we're going to lose about $6 in income tax revenues from the first cut alone,” Bailey said.

Bailey used “first cut” in reference to lawmakers’ intent to continue to incrementally lower the income tax rate over the next few years.

Both tax changes go into effect Jan. 1, 2023, for Kentuckians.

Will Kentucky be the new Kansas?

Like Kansas, if this experiment goes south, there will be a huge tax increase for Kentuckians [except the wealthy, of course] to avoid bankruptcy.

Be Careful What You Wish for!

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Written by John James Alexander, a pseudonym for a long-time Kentucky educator.





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