taxes

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Starting this week, Kentucky’s six percent sales tax now applies to a new set of services like automotive repairs, pet grooming, dry cleaning, gym memberships and landscaping.

The state legislature approved the tax increases in order to put more money towards public education and cut the state’s income tax for people and corporations.

But business owners affected by the tax hike say they’ve been unfairly targeted. One of them is Bill Rogers, who owns Parrot Cleaners, a dry cleaning shop in Louisville. A couple of years ago he made a big investment: two massive machines that help his shop run faster and cleaner.

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A decision Thursday from the U.S. Supreme Court could mean increased revenue for Kentucky. The ruling will allow states to collect sales taxes from online retailers.

Previous rulings limited a state’s ability to collect that revenue if the business didn’t have a physical presence in the state. Kentucky Center for Economic Policy Executive Director Jason Bailey said while there won’t be an immediate effect felt from the Supreme Court decision, it will eventually lead to more money for the commonwealth.

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An analyst from the Tax Foundation said raising the state cigarette tax is the wrong approach to creating new revenue in Kentucky. The Kentucky House passed a 50 cent cigarette tax hike last week as part of a two-year budget bill.

The Tax Foundation said Kentucky’s 2009 cigarette tax increase provided an initial boost in revenue, followed by a significant decline in the following years. Morgan Scarboro with the Tax Foundation said cigarette tax revenues are a volatile and unreliable source of revenue.

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Kentucky won’t be feeling as much of the effect of the federal tax reform law as most other states. That’s partly because the commonwealth doesn’t combine the standard deduction and the personal exemption.

According to a report from the Tax Foundation, Kentuckians won’t see significant changes in their state tax filings. But they will see that some of the exemptions they’ve previously claimed are more limited now.

Senior Policy analyst with the Tax Foundation Jared Walczak said the federal tax law changes are pro-growth and give states a chance to reform their own codes to become more competitive.

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Republican leaders of the General Assembly are throwing water on the idea that they’ll make major changes to the state’s tax code during the upcoming legislative session.

Lawmakers have to craft a new two-year budget for the state and are hoping to overhaul the pension systems in the session, which lasts from Jan. 2 until mid-April.

And for the first time in Kentucky history, Republicans will have control of the House, Senate and governorship during a budget-writing session.

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Less than 12 hours after the Republican-led Senate passed its version of tax overhaul legislation, Senate Majority Leader Mitch McConnell was back in his hometown addressing the press.

McConnell held a brief press conference at the Galt House in Louisville Saturday afternoon, during which he rebuffed criticism that the bill favors the wealthy.

Updated at 3:10 p.m. ET

House Republicans unveiled a draft tax bill on Thursday, calling for deep cuts in both individual and corporate tax rates.

"With this bill, we will grow our economy by delivering more jobs, fairer taxes, and bigger paychecks to Americans of all walks of life," said Rep. Kevin Brady, R-Texas, chairman of the House Ways and Means Committee.

The Tax Foundation Business Tax Climate Index

A new report from the Tax Foundation ranks Kentucky’s Business tax climate 33rd in the nation. The foundation hopes the report will serve as a guide while both the state and federal governments consider tax reform.

The Business Tax Climate Index examines how competitive a state’s tax code is, and how well it encourages businesses to locate in that state.

“When we look at Kentucky, the reason the state ranks a little below average on our index, isn’t, say, the corporate income tax rate. It is things like the fact that Kentucky has an inventory tax," said Jared Walczak, lead author of the report.

The Kentucky Chamber of Commerce is urging U.S. Senator Rand Paul of Bowling Green to support passage of the federal budget.

In a letter to Sen. Paul, the Chamber advocated lowering the corporate tax rate and simplifying the tax code. Spokesperson Kate Shanks said they wanted to make it clear that the business community supports making these steps toward tax reform, and the chamber is hoping the Bowling Green Republican will join them in those efforts.

Updated at 5:00 p.m. ET

President Trump and GOP congressional leaders have outlined their plan for the most sweeping overhaul of the federal tax code in more than three decades.

They're proposing deep cuts in both individual and corporate tax rates, saying that will help supercharge a slow-growing economy.

"We want tax reform that is pro-growth, pro-jobs, pro-worker, pro-family, and yes, tax reform that is pro-American," Trump said Wednesday during a rally at the Indiana State Fairgrounds.

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In a video played for business leaders, Gov. Matt Bevin called for a variety of changes to the state tax code, including lowering corporate income tax and the eventual elimination of the individual income tax.

The governor said the changes would make the state more attractive to people and companies looking to relocate.

“I’m more confident in your ability to take the leftover dollar and turn it into a ‘dollar plus’ than if you send it to Frankfort and just give us the ability to dispense of it,” Bevin said in a 20-minute long video played before a Kentucky Chamber of Commerce gathering Thursday.

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Gov. Matt Bevin said he wants to find more revenue to put toward Kentucky’s ailing pension systems and overstretched state budget, but not everyone is on board if the governor’s solution would mean tax increases.

Bevin said he wants to call lawmakers back to Frankfort later this year to hammer out a plan that would help the state generate more revenue through economic growth and eliminating tax breaks.

Republican lawmakers have historically been wary of tax increases, but Sen. Joe Bowen, a Republican from Owensboro, said lawmakers might be forced to consider it given the state’s financial jam.

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Earlier this week President Donald Trump released a blueprint for changes he’d like to make to the country’s tax code. Though specifics are still unclear, under one portion of the new plan, corporations–including Kentucky’s most profitable companies—would get a tax break.

Trump’s proposal would lower the corporate tax rate from 35 percent to 15 percent, reducing tax revenue into federal coffers by an estimated $2 trillion over 10 years, according to the Tax Foundation, a D.C.-based think tank.

Tyler Houlton, director of federal affairs at libertarian-leaning Americans for Prosperity, said the move would spur economic growth.

The debate over same-sex marriage is one that has heated up this year, with the Supreme Court striking down the Defense of Marriage Act (DOMA), which blocked the federal government from recognizing gay marriage. Seven states in 2013 saw same sex marriage legalized through court order, laws passed by state legislatures, or through popular vote.

WKU Economics Professor Susane Leguizamon has conducted  some research about an aspect of same sex marriage that most people probably haven't thought about: namely, what would the impact of nationwide gay marriage be on federal and state income tax receipts?

The research conducted by Prof. Leguizamon and her two co-authors finds 23 state would see a new fiscal benefit from same sex marriage legalization, while 21 would see a decline. Seven states wouldn't be impacted in this way since they don't have income taxes.

You can request a copy of the research by emailing Prof. Leguizamon here.

Here are some excerpts from our conversation with Prof. Leguizamon:

How would same-sex marriage legalization impact the income tax revenues of the three states in our listening area: Kentucky, Tennessee, and Indiana?

A new report by the Institute on Taxation and Economic Policy shows a big gap between Kentucky’s income levels on who pays taxes.

The report says Kentucky’s top 1 percent income bracket pays roughly 5 percent of the state’s income, while the bottom 20 percent pays 9 percent.

Middle income levels are saddled with a higher percent, the report said.

Jason Bailey, director of the Kentucky Center for Economic Policy, says the numbers show tax reform needs to happen quickly in Kentucky to better balance the burdens.

“This is one of the big issues that tax reform needs to address, the issue of the fairness of the tax system and the fact that there is inequity in who pays,” he said.

Lawmakers are likely to put off taking up recommendations by the state’s latest tax reform commission until a special session later this year.

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