FRANKFORT, Ky. — An effort to further reduce Kentucky’s personal income tax has passed the Kentucky House of Representatives after more than an hour of debate.
At the start of 2023, Kentucky’s personal income tax automatically went from 5% down to 4.5%. House Bill 1 formalizes that reduction as well as a further reduction to 4%, effective next year.
Last year, lawmakers spent three hours debating House Bill 8, which became law. It lowered the income tax from 5% to 4.5% effective this year and could eventually eliminate the tax entirely. It 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.
Thursday, opponents were trying to stop House Bill 1, saying that it would disporportionately help wealthy Kentuckians and place a burden on the working class. “It’s a wash for the bank accounts of middle income and working class families who are now paying more for Christmas photos and little league than they’re getting back under this bill,” said Rep. Josie Raymond (D-Louisville).
The bill’s sponsor, Rep. Brandon Reed (R-Hodgenville) called it a “glorious day.”
“With HB 1, we are sending a statement to the working Kentuckians that Frankfort has budgeted to our needs and not our wants, made investments, paid down debt and we have saved,” he said. “Now we are permanently reducing their tax burden, so they can further invest, pay down debt and save for their families.”
The legislation takes about $600 million out of the state coffers this year, according to House Speaker David Osborne (R-Prospect), who said earlier this week that it was “good policy to allow taxpayers to keep more of their hard-earned money.”
The Kentucky Center for Economic Policy released a statement after the vote, saying in part, “This bill is a giveaway to the wealthiest Kentuckians that will strain the state budget over time and jeopardize future investments in schools, health, housing and other needs across the commonwealth.… Rather than fund lavish tax giveaways to the wealthy, the legislature should use the current surpluses to make critical and transformative investments in the commonwealth, and protect key services in the future.”
The bill passed 79-19 and will move next to the Senate for consideration.