Merge pull request #2379 from PolicyEngine/MaxGhenis/issue2378

Kentucky flat tax post

CLAUDE.md

@@ -41,3 +41,12 @@
 - Follow the "PolicyEngine React commandments" in `src/README.md` for component structure
 - Add docstrings to all components and graceful error handling
 - When making changes, follow existing patterns in the codebase
+
+## Blog Posts
+
+- Keep URLs in blog post markdown files short (without query parameters) to prevent line-breaking issues
+- When adding blog posts, remember to remove the title (with the single #), description, and cover image
+- Use proper Markdown footnote syntax (`[^1]`) instead of superscript footnotes
+- New blog posts in `posts.json` should be added at the beginning of the array (most recent first)
+- For new blog posts from Medium, install `mediumexporter` and use it to download the post content
+- Image file paths should match the blog post filename in the posts.json entry

src/posts/articles/kentucky-cuts-income-tax-rate.md

@@ -0,0 +1,65 @@
+[On February 6](https://apnews.com/article/kentucky-tax-cut), Governor Andy Beshear signed [House Bill 1](https://apps.legislature.ky.gov/record/25rs/hb1.html), which reduces Kentucky's flat income tax from a rate of 4% to 3.5% starting in 2026. The bill previously passed the Kentucky House of Representatives with a [vote of 90–7](https://apnews.com/article/kentucky-legislature-tax) and the Senate with a [34–3 vote](https://apnews.com/article/kentucky-income-tax).
+
+We at PolicyEngine have updated our model to reflect these changes and analyzed their effects on the state of Kentucky and its residents.
+
+Key results for 2026:
+
+- Reduces state revenues by $684 million
+
+- Benefits 73% of Kentucky residents
+
+- Lowers the state's Supplemental Poverty Measure by 1.0%
+
+- Increases the Gini index of income inequality by 0.13%
+
+_Use PolicyEngine to [view the full results](https://policyengine.org/us/policy) or calculate the [effect on your household](https://policyengine.org/us/household)._
+
+## Household Impacts
+
+To understand the extent of this reform, it is important to note that higher-income households receive larger tax savings because they have more taxable income and therefore higher initial tax liability. For example, a childless adult earning $20,000 in Kentucky gains $58 from the 0.5pp rate reduction, while they would gain $483 if they earned $100,000, or $1,664 if they earned $500,000.
+
+**Table 1: Change in Net Income by Household Income for a Single Adult**
+
+| Household Earnings |                                                                Change in Net Income                                                                 |
+| :----------------: | :-------------------------------------------------------------------------------------------------------------------------------------------------: |
+|      $20,000       |  [\+$58](https://policyengine.org/us/household?focus=householdOutput.netIncome&reform=2&region=ky&timePeriod=2026&baseline=76143&household=51467)   |
+|      $100,000      |  [\+$483](https://policyengine.org/us/household?focus=householdOutput.netIncome&reform=2&region=ky&timePeriod=2026&baseline=76143&household=51470)  |
+|      $500,000      | [\+$1,664](https://policyengine.org/us/household?focus=householdOutput.netIncome&reform=2&region=ky&timePeriod=2026&baseline=76143&household=51468) |
+
+Below, Figure 1 displays the reduction in Kentucky income tax for a childless adult between $0 and $500,000 of household earnings. Since Kentucky's Family Size Credit fully offsets state tax liability for those below the federal poverty line, childless adults with income below $16,040 in 2026 will not benefit from the tax cut.[^1]
+
+**Figure 1: Change in Kentucky Income Tax for a Single Adult by Household Income**
+
+![](https://cdn-images-1.medium.com/max/2000/0*5p5Z-BS8sXYHB_iH)
+
+## Statewide Impacts
+
+Using PolicyEngine static modeling, the individual income tax rate reduction enacted in Kentucky will [cost the state $684 million](https://policyengine.org/us/policy) for tax year 2026. The measure would also increase federal revenues by $48 million, as residents would have less state income tax to take as an itemized deduction. On net, the tax cut would increase residents' net income by $636 million, without considering behavioral responses.
+
+**Figure 2: Budgetary Impact of Kentucky's Income Tax Cut**
+
+![](https://cdn-images-1.medium.com/max/2000/0*K9gfVVMZgO36y7L_)
+
+73% of Kentuckians will see an [increase in their net income](https://policyengine.org/us/policy), including 99% of those in the top income decile and 6% of those in the bottom decile.
+
+**Figure 3: Winners of Kentucky's Income Tax Cut by Decile**
+
+![](https://cdn-images-1.medium.com/max/2000/0*c3r5UopZtVsyE3CZ)
+
+The tax cut will provide an [average benefit of $335](https://policyengine.org/us/policy) per household, ranging from $5 in the bottom income decile to $1,470 in the top decile.
+
+**Figure 4: Income Distribution of Kentucky's Income Tax Cut by Decile**
+
+![](https://cdn-images-1.medium.com/max/2000/0*thDpBTm7YsAjCpGU)
+
+The tax changes are projected to [reduce Kentucky's poverty rate by 1.3%](https://policyengine.org/us/policy), applying the Supplemental Poverty Measure, while leaving deep poverty unchanged. The income tax reduction will also increase the state's Gini index of income inequality [by 0.14%](https://policyengine.org/us/policy).
+
+## Conclusion
+
+The 0.5pp rate reduction of Kentucky's income tax will lower state revenues by $684 million in 2026, while reducing poverty by 1.3% and increasing income inequality by 0.14%. The reform reduces tax liability for households across all income deciles, with higher-income households receiving larger benefits on both an [absolute](https://policyengine.org/us/policy) and [relative](https://policyengine.org/us/policy) basis.
+
+As policymakers evaluate reforms such as these, analytical tools like PolicyEngine offer critical insights into the impacts on diverse household compositions and the broader economy.
+
+We invite you to explore our [additional analyses](https://policyengine.org/us/research) and use [PolicyEngine](https://policyengine.org/us) to calculate your own tax benefits or design custom policy reforms.
+
+[^1]: Estimate of the one-person federal poverty line for 2026.

src/posts/posts.json

@@ -1081,5 +1081,14 @@
     "description": "Analysis of Senate Bill S2238, introduced by Senator Andrew Gounardes.",
     "filename": "nyc-ctc-s2238.md",
     "image": "nyc-ctc-s2238.webp"
+  },
+  {
+    "title": "Kentucky Cuts Income Tax Rate",
+    "description": "Analysis of lowering Kentucky's 4% income tax rate to 3.5%.",
+    "date": "2025-02-26",
+    "tags": ["us", "us-ky", "policy", "featured"],
+    "filename": "kentucky-cuts-income-tax-rate.md",
+    "image": "kentucky-cuts-income-tax-rate.webp",
+    "authors": ["david-trimmer"]
   }
 ]