A millennial-led think tank said its plans for tax reform, which call for the eventual elimination of income taxes, would make Kentucky one of the most pro-growth states in the country.
“The tax code is the number one way that a state can dictate the direction of its economy,” said Jordan Harris, executive director of the Pegasus Institute in Louisville.
For the last decade, Kentucky’s per-capita real gross domestic product growth improved by only 0.3 percent compared to a 2.58 percent growth in Tennessee, and a 4.7 percent increase in Indiana.
“While states around us have made decisions that promoted growth, Kentucky’s tax structure has remained an economic burden,” Harris said. “The result for our commonwealth is decades of anemic growth, restricting our production, limiting employment opportunities, and reducing household incomes.”
Kentucky has ranked 44th in economic growth, 30 percent below national average, since 1977, according to the Pegasus Institute report released Monday.
Harris said the key to boosting the state’s economic standing is by implementing a “pro-growth tax code” built on three simple flat rates. The 3-3-6 plan would place a 3 percent rate on income and corporate taxes, and broaden the sales tax base by closing existing loopholes.
Doing so would give Kentucky the second-lowest income rates in the region behind Tennessee, which has no income tax, and one of the lowest corporate tax rates in the country.
The plan could increase take home wages of the average Kentucky family by nearly $1,000 a year.
The second stage would be the elimination of Kentucky’s income tax, something Harris said “should be the ultimate objective of the state.
“Doing so would require closing nearly every existing sales tax loophole and expanding the base to include services in our current system,” Harris said, who urged legislators to give both plans serious consideration.
