FRANKFORT, Ky. — Gov. Andy Beshear on Wednesday took a major step to combat rising economic pressures in Kentucky by freezing vehicle property taxes.

Beshear signed an executive order to stop the spiking tax rate on vehicles caused by soaring used car values, which rose 40% in Kentucky since last year.

At Wednesday’s Team Kentucky briefing, Beshear also proposed a temporary 1% drop in the state sales tax.

Under that proposal, Kentuckians would see tax relief of approximately $1.2 billion – of which $873 million relates to sales tax savings, with $340 million coming from the reduction in vehicle property taxes.

“A booming economy and the best state budget in 25 years means we can do more to help our working families and small businesses buy and sell the essential goods and services that are costing more and that are simply priced too high,” Beshear said.

The property valuation for the average motor vehicle in Kentucky rose from $8,006 to $11,162 in just one year. Beshear said the abrupt change warrants action and under his order, a Kentuckian will pay a tax amount similar to last year (if they own the same vehicle in the same condition and are living in the same county) and they will not pay taxes on the inflated value for the next two years.

Those who have already paid their 2022 taxes don’t need to worry—they’ll get a refund from their local county clerk’s office.

According to Kentucky state law, only the General Assembly can exempt all or any portion of the property tax applied to motor vehicles. For the first time, in Senate Joint Resolution 99 (R.S. 2022), the Kentucky Senate stated the Governor has the authority to provide vehicle property tax relief.

Beshear said he’s also working with Kentucky House Democratic Caucus Whip Angie Hatton of Whitesburg, who is filing legislation to support cutting the state sales tax from 6% to 5% from July 1, 2022, through June 30, 2023.

The sales tax proposal decreases sales tax costs for all Kentucky families by over 16%, as the U.S. inflation rate is 7.5%, on purchases at retailers, restaurants and items at grocery stores that are not food or medicine, because those items are already tax-free.

Building and hardware materials and clothing purchases will also benefit from the sales tax reduction.         

This historic step would help families until the high U.S. annual inflation rate retreats, which is projected to be through 2022 and into 2023.