KENTUCKY — At the beginning of 2023, House Bill 8 took effect. It lowered the income tax in our state from 5% to 4.5%. And many members of the state legislature say they would like to eventually eliminate the income tax entirely.

That bill also made dozens of additional services, like personal fitness training, photography and home security monitoring, subject to the 6% sales tax at the start of this year.

In the first week of the 2023 Kentucky General Assembly session, the Kentucky House of Representatives passed House Bill 1 along party lines, which codifies a reduction in the personal income tax to 4%, effective in 2024. The bill is currently with the state Senate for consideration. 

Ashli Watts is the President and CEO of the Kentucky Chamber of Commerce, the state’s largest business association which promotes “Uniting Business and Advancing Kentucky.” 

During this In Focus Kentucky segment, Watts explains why the association believes lower income tax is key to future growth.

"From the last couple of years looking at the census data, the states that grew really had a lower income tax than Kentucky has, or a 0% income tax. And so you look at states like Tennessee, Texas and Florida, that have 0% income taxes. And those are the states that really grew states like North Carolina and others that have lower income taxes also grew. And so the legislature, I think, we have been strong proponents of tax reform for many years," Watts said.

She added that the change can't happen overnight.

"We can't kind of overnight overhaul our tax code and go from a 5% income tax to zero because we would still need money for all the services here in Kentucky like public safety, education, infrastructure, all the things that Kentuckians care about. But as more and more state revenues come in, if we meet certain goals, then that state income tax can drop a half of a percent every year," she said.

You can watch the full In Focus Kentucky segment in the player above.