The Buckeye Institute announced on Mar. 9 that reducing Kentucky’s personal income tax to three percent could generate nearly $2 billion in economic growth and create 7,000 new jobs by 2034. The findings come from a new report, “Continuing Kentucky’s Tax Reform Efforts,” produced in partnership with the Bluegrass Institute.
The report is intended to inform policymakers about the potential impact of further tax reform in Kentucky. Using its State Tax and Economic Long-Run Analysis (STELA) model, The Buckeye Institute analyzed two scenarios for lowering the state’s personal income tax rate.
Co-author Rea S. Hederman Jr., executive director of the Economic Research Center and vice president of policy at The Buckeye Institute, said, “Kentucky has established itself as a national leader in pro-growth tax reform, and The Buckeye Institute’s analysis shows that adopted reforms will result in nearly $2 billion in economic growth by 2034. But to compete with its lower-tax neighbors and remain economically competitive, Kentucky must continue its pro-growth reforms, and Buckeye’s analysis shows that cutting the income tax rate is a fiscally responsible path to sustained economic growth and a more prosperous future.”
The first scenario examined a reduction of the personal income tax rate to 3.5 percent, which was projected to result in $510 million in economic growth and 2,000 new jobs in 2026 alone. By 2034, this scenario could yield $1.76 billion in growth and add up to 6,000 jobs. The second scenario considered lowering the rate further to three percent, projecting $810 million in economic growth and 3,000 new jobs for 2026; by 2034 these figures rise to $1.99 billion and 7,000 jobs respectively.
According to the official website, The Buckeye Institute depended on private funding from individuals, corporations, and foundations. It had offices on Capitol Square in Columbus, Ohio according to the official website. The organization worked to promote free-market public policy via research, data analysis, and policy development according to the official website. While it concentrated on Ohio issues primarily, it also promoted free-market ideas nationally according to the official website. Policymakers were aided with research and data from The Buckeye Institute as reported by its official website. It was classified as a nonprofit under section 501(c)(3) of the Internal Revenue Code according to its official website.
The STELA model used for this analysis underwent double-blind peer review. A full methodology is available as an appendix within the report.
