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Critics Say Austerity Budget Boosts Big Businesses, Sidelines KY Families

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Monday, March 22, 2021   

FRANKFORT, Ky. -- As state lawmakers consider a slew of major last-minute tax breaks, their critics say the moves may benefit large industries and businesses, but would do little for Kentucky families.

Pam Thomas, senior fellow at the Kentucky Center for Economic Policy, said tax relief moving through the Legislature includes breaks for the film industry, telecommunications and insurance companies, and for private school or educational vouchers, among others.

She explained the proliferation of tax breaks reduces the money the Commonwealth has for schools, healthcare, infrastructure and other vital public investments.

"There's no new money for education, there's no new money for school social workers, there's no new money really for anything," Thomas outlined.

Lawmakers have already passed House Bill 278, which would give an income-tax deduction to the
more than 50,000 Kentucky businesses that received Paycheck Protection Program loans.

Thomas pointed out the break will likely only be helpful to businesses that were profitable in the crisis, not those that struggled to stay afloat and need the most assistance.

It's estimated the legislation could cost the state $240 million.

Thomas emphasized Kentucky's economy has sustained the pandemic better than economists thought it would, and noted the state budget has revenue above initial estimates.

But rather than taking that revenue and using it to invest in communities, she stressed lawmakers are focused on shrinking government spending.

"So, it seems that in part, the focus has been more on supporting, sustaining and helping businesses, less on supporting sustaining and helping individuals," Thomas asserted.

Thomas added more tax cuts will likely force Kentucky to give back the COVID-relief money it receives from the federal government.

"We don't have guidance yet from Treasury on exactly how that's going to be implemented, but right now is a very risky time for states to be passing tax credits, since we don't have that guidance," Thomas cautioned.

The American Rescue Plan gives the Commonwealth more than $2 billion in direct aid, but has a strict provision against the funds being used, directly or indirectly, to pay for tax cuts.

Disclosure: Kentucky Center for Economic Policy contributes to our fund for reporting on Budget Policy and Priorities, Criminal Justice, Education, and Social Justice. If you would like to help support news in the public interest, click here.


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