House committee votes to move tax reform bill lowering income tax forward

Kentucky has discussed tax reform for decades. But the 2022 session is seeing significant movement on the issues as lawmakers are moving a bill to lower the individual income tax.

House Bill 8, sponsored by Rep. Jason Petrie, includes a decrease in the personal income tax from 5% to 4% beginning in January 2023. From there, the plan provides a pathway to potentially drop the individual income tax rate to zero over time. The rate would lower in increments of 0.5 to 1 % per year based on a set of triggers built into the legislation.

This lowering to zero is set to take four to eight years but the plan could be paused based on actual revenue dollars.

The sales tax is being expanded under the bill to certain services to pay for the lowering of the income tax. The broadening of the tax base to services that are not currently subject to the sales tax includes nonmedical cosmetic surgery, telemarketing, photography, massages, bodyguards, polling, tattooing, social event planning, investment management services, and much more.

Things like groceries, medical expenses, and electric costs on an individual’s primary residence are not being taxed under the bill. And a committee substitute removed advertising from items that would be subject to sales tax.

House Bill 8 passed through committee with small changes presented in a committee substitute and now moves to the full House.

The Kentucky Chamber recently announced its support for House Bill 8 with the following statement from Kentucky Chamber President and CEO Ashli Watts:

“The Kentucky Chamber supports House Bill 8 as a strong step forward in continuing the critical work of comprehensive tax reform in Kentucky. True pro-growth tax reform is the Chamber’s top strategic priority and we call on the General Assembly to ensure Kentucky has a competitive tax structure by aggressively driving down our income tax to attract residents, support working families, and attract business and opportunity.”

Stay tuned to The Bottom Line for more news on tax reform.