Beech Tree News Network

“With HB 1, we are sending a statement to the hardworking Kentuckians that Frankfort has budgeted to our needs, not our wants; made investments, paid down debt, and we have saved.” --Rep. Brandon Reed, R-Hodgenville

-----

FRANKFORT— The Kentucky House of Representatives made another step toward eventually eliminating the state income tax rate with the passage of House Bill 1 on Thursday.

The bill’s primary sponsor, Rep. Brandon Reed, R-Hodgenville, said HB 1 is essentially a continuation of House Bill 8 from the 2022 legislative session, which set that stage for a major overhaul of Kentucky’s tax structure.

Reed said HB 1 will codify the state income tax rate reduction to 4.5% from 5% for 2023 and further reduce the state income tax rate to 4% beginning Jan. 1, 2024.

Last year’s HB 8 established “triggers” that will lower the state income tax rate by either a half or full percentage point once state revenues reach certain levels. Revenues met the first trigger in 2022, which automatically reduced the state income tax from 5% to 4.5% on Jan. 1. Further income tax rate reductions require legislative approval.

Reed said HB 1 puts the General Assembly, “another step closer to putting more money back into the pockets of hard working Kentuckians.”

“With HB 1, we are sending a statement to the hardworking Kentuckians that Frankfort has budgeted to our needs, not our wants; made investments, paid down debt, and we have saved,” Reed said. “We are reducing their tax burden, so they can further invest, pay down debt and save for their families.”

The House debated HB 1 for nearly an hour and a half Thursday with Minority Floor Leader Derrick Graham, D-Frankfort, being one of the members to speak against the bill. Graham said the state’s current surplus is the result of one-time federal COVID-19 relief funds. He expressed concerns that the state and its budget will struggle in the future under the new tax plan.

“What we’re seeing is that we’re thinking about now and not about tomorrow,” Graham said. “And if we continue down this path, when all of the federal dollars are gone, the Commonwealth of Kentucky is going to have a difficult time trying to fund pre-K and higher education, our state government, our state employees (and) our retirees.”

Rep. Josie Raymond, D-Louisville, agreed and stated that the tax cut benefits the wealthy the most and hardly makes an impact on middle- and low- income Kentuckians, especially after HB 8 in 2022 raised taxes on certain services.

“Middle-income families like mine will get an income tax reduction of about 300 bucks,” she said. “Three hundred bucks is 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.”

Majority Whip Jason Nemes, R-Louisville, was among the House members to vote “yes” on HB 1. He said with passage of the measure, it was “a great day” and a “banner” day for Kentucky.

 “This bill is about tomorrow because it will hopefully provide the jolt to our state that we need,” Nemes said. “States with a 0% income tax have grown 56% faster since 2000.”

Speaker Pro Tempore David Meade, R-Stanford, agreed that HB 1 is the right move for Kentucky. He said since the first reduction bill in 2018, which lowered the state income tax rate from 6% to 5%, Kentucky has seen “significant revenue gains.”

“Now it’s time for taxpayers to reap the benefits,” Meade added.

The House approved HB 1 by a 79-19 vote. It will now go before the Senate for consideration.