Kentucky

Kentucky's personal income tax is a five-bracket schedule ranging from 2% on the first $3,000 of taxable income to 6% on the amount over $8,000. Personal and child exemptions are in the form of $20 tax credits. Corporate income is taxed according to a five-bracket schedule ranging from 4% to 8.25%, with the lowest rate applied to net income up to $25,000 and the highest to net income above $250,000. Kentucky also levies a 6% sales and use tax, exempting food and drugs and with no additional local sales taxes permitted. State excise taxes are collected on motor fuels, alcoholic beverages, cigarettes (3 cents on each pack which, after Virginia, is the lowest in the country), pari-mutuels, insurance premiums, amusements, and other selected items. Personal property taxes include a car tax. Kentucky imposes an oil production tax (4.5% of market value), a coal severance tax (4.5% of gross value), and a natural resources severance tax (4.5% of gross value less transportation costs). Kentucky's estate tax (maximum rate 16%) is tied to the federal exemption for state death taxes, and is therefore set to be phased out in tandem with the phasing out of the federal estate tax credit by 2007, unless the state takes positive action to establish an independent estate tax. Kentucky's revenue losses from the phasing out of its estate tax are estimated at -$11.3 million for 2002/03, -$2.4 million for 2003/04 and -$55.8 million for 2006/07. Kentucky's inheritance tax exempts close (Class A) relatives. Death and gift taxes accounted for 1% of state collections in 2002. Other taxes include various license fees and stamp taxes.

Total state tax collections in Kentucky in 2002 were $7.974 billion, of which 33.5% was generated by the state income tax, 29% by the state general sales and use tax, 17.9% by state excise taxes, 6.76% by state license fees, 5.4% by state property taxes, and 3.79% by the state corporate income tax. In 2003, combined state and local taxes amounted to 9.4% of income, the 31st highest rate in the country.

The following table from the US Census Bureau provides a summary of taxes collected by the state in 2002.