Columbus, OH – A new report, Continuing Kentucky’s Tax Reform Efforts, by The Buckeye Institute, found that cutting the commonwealth’s personal income tax to three percent would create nearly $2 billion in economic growth and 7,000 new jobs. The Buckeye Institute partnered with Kentucky’s Bluegrass Institute to conduct the research. 

“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,” said report co-author Rea S. Hederman Jr., executive director of the Economic Research Center and vice president of policy at The Buckeye Institute. “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.”

INFOGRAPHIC: Continuing Kentucky’s Tax Reform Efforts

Using a dynamic scoring model—STELA (State Tax and Economic Long-Run Analysis)—developed by economists at The Buckeye Institute, the report’s authors analyzed two scenarios to provide Kentucky policymakers with a better understanding of how each proposal will affect the state’s businesses, families, economy, and revenues. 

Scenario 1: Cutting the Personal Income Tax to 3.5%

• $510 million in economic growth in 2026 alone and $1.76 billion by 2034.
• 2,000 more jobs in 2026 and 6,000 by 2034.
• $260 million more in business investment in 2026 and $750 million by 2034.
• $180 million more in consumer spending in 2026 and $670 million by 2034.

Scenario 2: Cutting the Personal Income Tax to 3.0%

• $810 million in economic growth in 2026 alone and $1.99 billion by 2034.
• 3,000 more jobs in 2026 and 7,000 by 2034.
• $370 million more in business investment in 2026 and $850 million by 2034.
• $290 million more in consumer spending in 2026 and $760 million by 2034.

The authors of Continuing Kentucky’s Tax Reform Efforts are Rea S. Hederman Jr., executive director of the Economic Research Center and vice president of policy at The Buckeye Institute; and Sai C. Martha, an economic research analyst at The Buckeye Institute.

Consistent with academic standards and methodologies, STELA underwent a double-blind peer review. A full methodology and technical description are available in the report’s appendix, allowing researchers to validate STELA’s accuracy and conclusions.

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