The Tax Foundation, an independent tax policy group, released its 2019 tax climate rankings and Kentucky has moved up 16 spots to 23—among the top half of U.S. states in terms of a competitive tax climate.
In setting the ranking, the Tax Foundation cited tax reform legislation that was passed earlier this year by the General Assembly that made several changes to the tax code including lowering the highest corporate tax rate by collapsing multiple tax brackets into a flat 5% rate. The bill enacted a single sales factor apportionment formula and created a state tax credit for the inventory tax. The Chamber has advocated for these changes for years.
The Tax Foundation commended Kentucky for passing a 50-cent cigarette tax increase, the largest in history. This Kentucky Chamber priority provides much-needed revenue for the state and is a positive step to improve the health of Kentuckians.
“Policy matters, and Kentucky’s new ranking from the Tax Foundation is proof that we can improve the competitiveness of Kentucky with effective policy change,” stated Sr. Vice President of Public Affairs Ashli Watts. “The Chamber commends the General Assembly for moving the needle in the right direction on tax policy.”
The ranking is derived from a combination of scores based on the corporate, individual, property, sales, and unemployment insurance taxes. Though the unemployment insurance tax isn’t typically thought of when tax competitiveness is reviewed, it is paid by every employer and how it works varies among the states. While Kentucky’s scores are improving across most categories, it scores low—47—in the unemployment insurance category.
Additionally, the Chamber has identified repealing or phasing out the Limited Liability Entity Tax and reforming to the unemployment insurance program as further changes needed. The Chamber continues to advocate for changes to the tax code that further improve Kentucky’s standing among the states.