The Tax Foundation

Research Areas

Kentucky

The Facts on Kentucky's Tax Climate

Here are some basic facts on Kentucky's tax system and how it compares to other states:

Tax Freedom Day Arrives on April 10 in Kentucky
Tax Freedom Day is the day when Americans finally have earned enough money to pay off their total tax bill for the year. In 2008, Kentucky taxpayers had to work until April 10 (ranked 45th nationally) to pay their total tax bill, 13 days earlier than national Tax Freedom Day (April 23). Neighboring states' Tax Freedom Days are: Illinois, April 23 (ranked 16th nationally); Indiana, April 17 (ranked 29th nationally); Ohio, April 17 (ranked 28th nationally); West Virginia, April 8 (ranked 47th nationally); Virginia, April 25 (ranked 12th nationally); Tennessee, April 11 (ranked 44th nationally); and Missouri, April 14 (ranked 36th nationally).

Tax Freedom Day has been projected using the most up-to-date economic and budget projections from official government agencies. However, Tax Foundation estimates of average state and local tax rates for 2008 will not be released until later this spring as we await more up-to-date data from various government agencies.
Full study of Tax Freedom Day, nationwide and in each state

Kentucky's State/Local Tax Burden Below Average in 2007
Estimated at 10.9% of income, Kentucky's state/local tax burden percentage is barely below the national average of 11.0% and ranks 20th highest nationally. Kentucky taxpayers pay $3,568 per capita in state and local taxes on per-capita state income of $32,673.
Kentucky's State-Local Tax Burden, 1970-Present

Kentucky's 2008 Business Tax Climate Ranks 39th
Kentucky ranks 36th in the Tax Foundation's State Business Tax Climate Index. The Index compares the states in five areas of taxation that impact business: corporate taxes; individual income taxes; sales taxes; unemployment insurance taxes; and taxes on property, including residential and commercial property. Neighboring states ranked as follows: Illinois (28th), Indiana (12th), Ohio (46th), West Virginia (37th), Virginia (14th), Tennessee (16th), and Missouri (15th).
50-State Comparison of Business Tax Climates (data only)
2008 State Business Tax Climate Index, Fifth Edition (full study)

Kentucky's Individual Income Tax System
Kentucky's personal income tax system consists of six brackets with a top rate of 6% kicking in at $75,000. The top rate is 22nd highest nationally among states levying personal income taxes. Kentucky's 2005 individual income tax collections were $909 per person, which ranked 18th highest nationally.
50-State Table of Individual Income Tax Rates
50-State Table of State Individual Income Tax Collections
50-State Table of State and Local Individual Income Tax Collections Per Capita

Kentucky's Corporate Income Tax Structure
Kentucky's corporate tax structure consists of three brackets with a top rate of 7%, kicking in at $100,000. Among states levying corporate income taxes, Kentucky's top rate is 36th highest nationally. In 2006, state-level corporate tax collections (excluding local taxes) were $238.14 per capita, ranking 8th highest nationally.
50-State Table of Corporate Income Tax Rates, 2000-2008
50-State Table of State and Local Corporate Income Tax Collections Per Capita and Per Household, 2005
50-State Table of State Corporate Income Tax Collections Per Capita, 2006

Kentucky Levies Sales Tax above National Median; Cigarette Taxes among the Lowest Nationally
Kentucky levies a 6% general sales or use tax on consumers, which is above the national median of 5.4 percent. In 2005, combined sales tax collections from state and local governments were $1,115 per capita, which ranked 32nd nationally. Kentucky's gasoline tax is variable and depends on the current price of gasoline. At the start of 2008, Kentucky's gasoline tax equaled 18.5 cents per gallon and ranked 43rd nationally. Kentucky's state-level cigarette tax stands at 30 cents per pack of twenty, which ranks 5th lowest nationally. The sales tax was adopted in 1960, the gasoline tax in 1920 and the cigarette tax in 1936.
50-State Table of Sales and Excise Tax Rates
50-State Table of State and Local General Sales and Gross Receipts Tax Collections Per Household and Per Capita, Fiscal Year 2005

Kentucky's Statewide Property Taxes Comparatively High; Local Property Taxes Remain Low
Kentucky is one of the 37 states that collect property taxes at both the state and local levels. As in most states, local governments collect far more. Kentucky's localities collected $1,680,995,000 in property taxes in fiscal year 2004, the latest year for which the Census Bureau has published state-by-state data. At the state level, Kentucky collected $455,460,000 in property taxes during FY 2004, bringing its combined state/local property taxes to $2,136,455,000. That brings its per capita collection to $516, ranking 45th nationally.
State property tax collections per capita by state

Federal Tax Burdens and Expenditures: Kentucky is a Beneficiary State
Kentucky taxpayers receive more federal funding per dollar of federal taxes paid than the average state. Per dollar of federal tax collected in 2005, Kentucky citizens received approximately $1.51 in the way of federal spending. This ranks the state 9th highest nationally and represents a rise from 1995 when Kentucky received $1.28 per dollar of taxes in federal spending (ranked 13th nationally). Neighboring states and the federal spending received per dollar of federal taxes collected were: Illinois ($0.75), Indiana ($1.05), Ohio ($1.05), West Virginia ($1.76), Virginia ($1.51), Tennessee ($1.27), and Missouri ($1.32).
Comparing the amount of federal taxes sent to Washington with the amount of federal spending coming back to the state

Articles from the Tax Foundation