Cameron, the state’s attorney general, announced his economic plan for Kentucky Wednesday morning. The most concrete parts of the plan include eliminating the state income tax and instituting work requirements for Kentuckians on Medicaid.
During a news conference in Louisville, he criticized the economic records of incumbent Democratic Gov. Andy Beshear and President Joe Biden.
“Andy Beshear and Joe Biden are singing out of the same hymnal when it comes to your finances,” Cameron said at a news conference. “Andy Beshear has led as the welfare governor, I will lead as the workforce governor.”
Cameron’s plan to eliminate the state income tax comes after the state legislature passed measures lowering the income tax two years in a row. This year, Kentucky’s income tax decreased to 4.5%, and the legislature passed another slash to the state’s income tax that will go into effect January 2024. Beshear signed the most recent measure.
“The government was created to serve the people, not the other way around. This governor can't veto tax cuts and budget reserves and then go on to take credit for every new job in Kentucky,” Cameron said.
Beshear vetoed the 2022 tax cut bill, although in his veto message Beshear objected to portions of the bill that extended sales tax to more services.
Jason Bailey, executive director of the progressive-leaning Kentucky Center for Economic Policy, said income tax makes up roughly 40% of Kentucky’s annual budget. He said eliminating it, or even cutting it, would be a massive hit to state-funded programs like education and infrastructure.
“No one who is proposing to eliminate [the state income tax] has provided any plan or even identified an option that would generate that kind of revenue,” Bailey said. “Right now, we're in a period where unemployment is very, very low, and that helps raise that revenue. But, you know, recessions come. At some point, we will need those revenues.”
Income tax revenues are already down due to the first round of cuts despite low unemployment and high inflation. By June, the state had collected $172 million less so far from withholding income alone compared to last year.
Only one other state has eliminated their income tax – Alaska after the creation of the Trans-Alaska Pipline created billions of dollars in new revenue. Meanwhile, the other states that don’t have an income tax never had one to begin with.
Bailey said many of those states have enough natural resources or tourism to make up for the gap, which Kentucky does not have. Many also have significantly higher sales taxes, which disproportionately hurt low-income households.
Medicaid work requirement
Another key element of Cameron’s plan would create a work requirement for some people who receive Medicaid benefits – a plan championed by former GOP Gov. Matt Bevin.
During the news conference, Cameron accused Beshear and his father, former Democratic Gov. Steve Beshear, of creating a “welfare state.”
“The Beshear family legacy is one of expanding the welfare state and creating a culture of dependency that threatens not only our economy, but also the very nature of who we are as people,” Cameron said.
The elder Gov. Beshear expanded Medicaid eligibility in Kentucky to include adults who make up to 138% of the federal poverty level.
Cameron said he does not intend to reverse the Medicaid expansion, but to place work requirements on “able-bodied adults.”
Bevin attempted to require Medicaid beneficiaries to prove they are working, trying to find work, volunteering or performing a “community engagement” activity every month in order to stay in the program. The program was held up in the courts system and ultimately disbanded by Beshear.
But a 2019 study published in the Journal of American Medical Association found that about 3.5% of Kentuckians who are on Medicaid would have been at risk of losing their Medicaid under the requirement. The Government Accountability Office said the plan would have cost hundreds of millions of dollars in administrative expenses.
Bailey said similar requirements in other states have resulted in fewer people getting Medicaid because they struggle with the paperwork.
“People lose coverage, not because they're not working, but because they are not keeping up with the paperwork requirements,” Bailey said. “It's not really a work requirement, it's paperwork requirements… It's a misguided policy that is very expensive to implement.”
During the pandemic, significantly more people enrolled in Medicaid. By early 2023, enrollment in Kentucky was up 168% to more than 1.6 million people. But as people are required to requalify this year for the first time since the pandemic, Bailey said he expects that number to decrease substantially.
In response to Cameron’s plan, Beshear campaign spokesman Alex Floyd said the Democratic governor has been one of the “best governors for economic development” in state history.
“Andy Beshear has cut taxes while bringing record-breaking economic investment to Kentucky year after year. Daniel Cameron's reckless plan is just a rerun of the Matt Bevin playbook of cutting health care access, privatizing our public schools, and raising taxes on working families to pay for a tax giveaway for the wealthy,” Floyd said
