FRANKFORT, Ky. — Kentucky is on track to meet the conditions to reduce its income tax rate from 4% to 3.5%, effective Jan. 2026. 

After hours of debate, lawmakers passed House Bill 8 in 2022. The measure established yearly reductions on the state's income tax by .5% provided certain conditions are met until it is eliminated.  

"This simply means that the men and women of Kentucky get to keep more of their hard-earned money," said House Appropriations and Revenue Chair Jason Petrie, R-Elkton. "We’ve been willing to make tough decisions when it comes to the budget and to place an emphasis on meeting our needs rather than spending on wants. As a result, we continue to see our plan is working. We are on track to eliminate Kentucky’s individual income tax, and we are doing so while providing for the necessary programs that Kentuckians depend on.”

The bill helped Kentucky's income tax go down from 5% to 4.5% in 2023 before going down another half-percentage point to 4% in 2024.

However, it will remain at 4% in 2025 after an Aug. 2023 letter showed Kentucky didn't meet the condition that state revenues at the end of a fiscal year are the same as or higher than appropriations, plus the cost equivalent of a 1% reduction in the income tax rate. Majority Whip Jason Nemes, R-Louisville, said at the time it was not a surprise because of emergency expenses like recovery from flooding in eastern Kentucky. 

Sen. Chris McDaniel, R-Ryland Heights, applauded lawmakers' commitment to fiscal responsibility ahead of the anticipated reduction.

"Over the past decade, we have grown the state's reserve from $0 to over $5 billion," McDaniel said in a statement. "At the same time, we have stabilized and made solvent the worst-funded pension systems in the nation, made historic investments in education, and reduced the income tax from 6% to 4%.

"Kentuckians know best how to spend their money and do so more efficiently than the government. We are proud to help them and their families keep more of their hard-earned money."

However, some Democrats have said the bill has shifted the burden from the highest earners to everyday Kentuckians.

"What we are seeing, basically, is a failure to invest in the services Kentucky needs," said State Rep. Nima Kulkarni, D-Louisville, in Sept. 2023. "We are talking about worker shortages. We need to be able to pay our teachers more. We need to be able to pay our first responders more, and we should anticipate further disasters."

A representative for House Majority leadership said lawmakers will continue to monitor state revenue and spending as they prepare for the 2025 Regular Session in January.