While consumption taxes by themselves are a regressive tax form, sales tax
be part of a fair broader tax scheme that includes some progressive income tax characteristics and property tax. The fact that Kentucky’s sales tax has never been applied to services is nonsensical—why should sales tax be paid to buy a pair of pants, but not paid when those pants are dry-cleaned?
Applying Kentucky’s sales tax to most services would generate $1 billion in revenue over the next two years — nearly enough to eliminate the state’s budget shortfall, according to Legislative Research Commission estimates.
Nevertheless, House leaders say they doubt there is enough time to overhaul the state’s complicated tax system before the legislative session ends in April.
“I don’t think we’ll get to where we can actually do … tax modernization this session because we have the daunting task of writing an entire budget,” House Speaker Greg Stumbo, D-Prestonsburg, said at a meeting with reporters Friday.
Still, Stumbo has asked Republican and Democratic legislators to work with LRC economists to draft a tax-reform proposal so the legislature can “begin the debate.”
A true sales tax taxes value added. Labor’s value is subjective. Taxing labor is a way of driving down labor rates as a component of commerce. Pure labor activities don’t keep records and taxing their labor will drive down the price of labor to the consumer and the wages paid to the worker.
A goodly portion of our economy will also go underground.
It is necessary to revise our tax policy completely. Eliminate property taxes on single family residences valued at less than $100,000 or owned by retired persons whose retirement income (proved annually) is less than $35,000 – regardless of the value of the s-f-r. Lower sales taxes to 3%, continue to exempt medical, hospital (except ‘for-profit hospitals) & pharmaceuticals & food (real food – no soft drinks or chips & dips). Begin with 6 progressive tax benches, no deductions or conclusions and spread the benches from 3% for the first $5,000 to about 12% on the last $100,000. It’s time to tax the people who can afford taxes.
I have $7,500 of taxable income for last year. I pay a higher rate (average & last $) than one with $75,000 of taxable income. Granted there are so many more of us at $7500 than $75000 we generate more gross federal revenues, and to compensate we’d have to raise theirs 5%. Well let them pay it. I’m retired. Set the system up so that they don’t get taxed on qualifying investments, and I’m not talking about church vestments.