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A Tax Credit for Kentucky's Lower-Income Workers?

PHOTO: The idea of a state Earned Income Tax Credit in Kentucky now has the backing of the governor's tax reform panel.
PHOTO: The idea of a state Earned Income Tax Credit in Kentucky now has the backing of the governor's tax reform panel.
December 27, 2012

FRANKFORT, Ky. - A tax credit for the working poor was heavily debated this year, but survived to make the list of proposed state tax code changes sent to Gov. Steve Beshear by his blue-ribbon commission.

A state Earned Income Tax Credit is seen by proponents as one of the best tools to help working families climb out of poverty. Molly Tevis-Orona, who lives in Jeffersontown, says her family uses a similar, federal tax credit to pay for car and homeowners' insurance.

“We cannot get to work unless we pay our car insurance, because you cannot drive without car insurance - and most of the time, we just have enough money to make ends meet.”

She says her family of three, living on an annual income of $24,000, has used the federal Earned Income Tax Credit for the past four years.

Twenty-five states and the District of Columbia offer their own versions of the Earned Income Tax Credit. Terry Brooks, Kentucky Youth Advocates executive director, says it would be a good way to jump-start broader tax reform in the state.

“If that works at the federal level, what we really want is to double down. We want that same level of commitment at the state level.”

The governor's Blue Ribbon Commission on Tax Reform recommended a credit that would be 15 percent of the federal credit. Kentucky Youth Advocates estimates the price tag to the state at $114 million.

Tevis-Orona says she and others who receive tax-credit money pump it back into the economy.

“We're not using it on anything frivolous, I'll tell you that right now. Actually, studies show that most recipients of the Earned Income Tax Credit use it to either further their schooling or pay for some life bill.”

EITC legislation repeatedly has died in the Kentucky Legislature. Brooks says the federal credit has had bipartisan support in Washington, D.C., over the years, something he hopes will eventually happen in the Bluegrass State as well.

Greg Stotelmyer , Public News Service - KY