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House passes bill to reduce Kentucky state income tax

Brandon Reed
Posted at 5:54 PM, Jan 05, 2023

FRANKFORT, Ky. (LEX 18) — Kentucky House Republicans passed their top priority bill on a 79-19 vote on Thursday.

House Bill 1 would cut the personal income tax rate in Kentucky to 4%, beginning in 2024. It also codifies the rate reduction that went into effect this year. That set the income tax rate at 4.5% for 2023.

This is all part of the Republicans' plan to eventually get rid of income tax altogether. They believe these tax cuts will allow Kentuckians to keep more of their own money, spur future economic growth, and contribute the population growth.

"It's putting more money back into the hardworking Kentuckians' [pockets] across the Commonwealth," said Rep. Brandon Reed, the bill's sponsor. "They'll be able to spend their money like they see fit. They'll be able to pay down debt. They'll be able to pay for their families."

But opponents of the measure don't think the cuts are a good idea.

Democrats argue it would take more than $1 billion in tax revenue annually from the state's General Fund. They also believe the measure would mostly benefit the wealthy.

"This particular piece of legislation hurts lower-income Kentuckians and helps the wealthier, higher-income Kentuckians," said Rep. Ruth Ann Palumbo, a Democrat who voted against the bill. "It is not sustainable. Future legislators will have to raise taxes and we are not being fiscally responsible."

Pam Thomas with the Kentucky Center for Economic Policy told lawmakers cutting the income tax to 4% would be a boon to Kentucky's wealthiest, who will get more $11,000 a year.

"The typical Kentucky family - those in the middle class, like most of us - will retain between 38 cents and $5 a week from the reduction from 5% to 4% - hardly noticeable in day-to-day life," said Thomas.

However, Republicans dismissed those fears. Rep. Jason Petrie said Democratic critics have warned of pending increases to the sales tax rate since the legislature cut individual and corporate income tax rates from 6% to 5% in 2018, which hasn't happened.

"That narrative is just so bad for the public," said Petrie. "I mean, we're five years in - and I'll wait for the 6th year, the 7th, the 10th year, and the 15th year where everybody's still saying we have to raise taxes, everything's going to hell in a hand basket - while we continue doing what we're doing and we're still not raising taxes."

House Bill 1 will now be turned over to the Kentucky Senate. The bill is expected to be taken up in February.