UPDATE: House Bill 1, legislation reducing the individual income tax from 4% to 3.5%, passed out of the Senate Committee on Appropriations and Revenue unanimously and had two readings Friday. It is expected to receive final passage when the legislature returns on February 4.
The House passed the bill 90-7 on Thursday.
On January 8, the House Appropriations and Revenue Committee advanced the bill to a floor vote. The bill received 17 votes for, no votes against, and three passes.
This bill aligns with the state’s ongoing efforts to gradually eliminate the individual income tax, following reductions from 5% to 4% over the past two years following the passage of House Bill 8 in the 2022 session.
While discussing Kentucky’s tax reform journey, Chairman Jason Petrie, the sponsor of House Bill 1, said these measures have helped the state compete with neighboring states that are also lowering individual income taxes and help retain and attract new people to the Commonwealth.
The business community has been a strong advocate for these tax reforms, emphasizing their potential to enhance the state’s economic competitiveness. In conjunction with the legislative developments, the Chamber’s Center for Policy and Research released a new report titled “A Guide to Kentucky Tax Reform,” which examines recent tax reform efforts and outlines the next steps.
The report highlights the benefits of a pro-growth tax structure and provides recommendations for future reforms to ensure sustained economic development in Kentucky.
Stay tuned to The Bottom Line as the 2025 legislative session progresses.