Kentucky Republican gubernatorial candidate David Williams released the outline of his economic plan earlier this week. Williams proposes to repeal the state’s personal and corporate income taxes as part of a “revenue-neutral” tax swap, which of course means that the remaining taxes levied by Kentucky would have to be increased by close to $4 billion a year to make up for the loss of the income tax.
Williams would replace the state’s personal and corporate income taxes with a broader consumption tax of some sort. He says of this proposal, “If you tax consumption, people will make discerning choices about consumption and you will encourage productivity.”
Consumption taxes as a substitute for income taxes is backwards tax policy at its worst and is catastrophic for middle- and low- income families. In fact, the Institute on Taxation and Economic Policy (ITEP) found that the impact of a similar proposal in 2009 was disastrous: the poorest 20 percent of Kentuckians would have seen their taxes rise by $136 on average, while the richest one percent would have received an average tax cut of $40,910.
Explaining his plan to abolish the income tax, Williams says it will be somehow economically stimulative: “If you look at states that have done away with income taxes, states like Texas, Tennessee and Florida, many jobs there were created after they adopted that."
What Williams doesn’t seem to know is that none of these states had income taxes in the first place, so none have actually “done away” with them. And whether it’s Texas’s oil or Florida’s tourism industry, these states have unique natural resources to fall back on that Kentucky can’t match.
What’s more, living in Texas, Tennessee, or Florida is hard for working families. ITEP found that all three of these states are in the top ten for the states with the most regressive tax structures, meaning they make it cheap for rich people live there, but expensive for everyone else because of reliance on consumption taxes. Florida taxes its poor families at a rate of 13.5 percent, the second highest rate in the nation.
Williams, the GOP’s candidate for governor in Kentucky, proposes that an unelected tax reform commission of “economic and tax experts” should be appointed to create a plan based on his broad outlines. It’s not clear, however, where he’ll manage to dig up a panel of actual tax experts who believe that income tax repeal is a smart move. The only support for that kind of policy is in conservative think tanks funded by corporations who, it is well known, hate paying taxes.
Should Williams unveil more details about his economic plans as the election approaches, we’ll be right here, ready to flag his more outrageous proposals and assumptions.
Photo via Am Heart Advocacy Creative Commons Attribution License 2.0