In Fiscal Year (FY) 2015, Kentucky collected $16.5 billion in state and local taxes. While this is an impressive sum of money, it tells us little about whether or not the average Kentucky taxpayer can afford this level of taxation.
As shown in Chart 1, Kentucky’s state and local tax burden (tax collections divided by private sector personal income) was the tenth highest in the nation for FY 2015 at 16 percent—or 11 percent above the national average of 14.4 percent.
As shown in Chart 2, Kentucky’s tax burden has increased over time by 110 percent to 16 percent in FY 2015 from 7.6 percent in FY 1950.
As shown in Chart 3, Kentucky’s 16 percent tax burden is greater than these combined industries: retail trade (6.7 percent), construction (6.4 percent), information (1.8 percent), and farm earnings (1 percent).
Kentucky’s higher than average state and local tax burden is driven by a significant individual income tax burden (5.2 percent, 5th highest), corporate income tax burden (0.9 percent, 10th highest), and all other taxes burden (3.6 percent, 12th highest) that partially offsets the other lower taxes such as the low property tax burden (3.2 percent, 41st highest), and sales tax burden (3.2 percent, 32nd highest).
Of course, the tax burdens for local government can vary just as much as they do among the 50 states. As such, we have also calculated the local government tax burden for every county in Kentucky—this includes every taxing jurisdiction within the geographic county borders whether it is a city, a special district, or county government itself.
The Kentucky counties with the highest local government tax burden include:
The Kentucky counties with the lowest local government tax burden include:
Note: The tax burdens for counties (or independent cities) with large military bases, such as Christian County, are inflated because, by definition, military compensation is excluded from the denominator as it does not constitute private sector activity. Christian, McCreary, and Franklin Counties were excluded in the map.
Additionally, military activity often physically crowds-out the private sector pushing it out into surrounding areas. While a significant portion of surrounding private sector activity is due to the presence of the base, it is counted in the counties where the business is physically located. Thus, the tax burden, as a percent of private sector personal income, is overstated in counties with military bases and understated in surrounding counties.
Finally, don’t forget to watch our exclusive time-lapse video of state and local tax burdens over the last 65 years! See if your state has been above or below the national average?
Scott has nearly 20 years of experience as a public policy economist. He is the author, co-author and editor of over 180 studies and books. His professional experience also includes positions at the American Conservative Union Foundation, Granite Institute, Federalism In Action, Maine Heritage Policy Center, Tax Foundation, and Heritage Foundation.