On Thursday, the House passed House Bill 1, which would enact the second income tax reduction envisioned by House Bill 8. House Bill 8 puts Kentucky on a path to eliminating the individual income tax. The first reduction has taken place. Effective January 1, 2023 the individual income tax was reduced from 5 percent to 4.5 percent and House Bill 1 clarifies this. House Bill 1 will also reduce the individual income tax another 0.5 percent to take effect January 1, 2024.
House Bill 1 passed through the House Appropriations and Revenue Committee earlier in the day.
In the committee meeting, there was discussion of how this bill will impact state revenues specifically during a recession. Bill sponsor Rep. Brandon Reed, vice chair of the committee, indicated it would help Kentuckians during recession because it will ensure people keep more of their income to spend.
House Bill 8, passed in the 2022 session, empowers the General Assembly to reduce individual income tax by 0.5 percent when certain economic and fiscal triggers are met. Specifically, when the budget reserve trust fund is at a certain level and when revenues exceed expenditures by a specific amount.
Rep. Myron Dossett, who represents a district on the border with Tennessee, a state with no individual income tax and a much faster growing population than Kentucky stated, “Our goal is to grow this commonwealth. By growing the population, we grow our revenue base.”
House Bill 1 passed committee 16-4 before passing 79-19 on the House floor
The committee and full House also took up and passed a bill to provide additional funds for the Bowling Green veterans center to cover cost overruns due to inflation.
Stay tuned to The Bottom Line for more news on this issue.