Gov. Andy Beshear signed legislation Friday that will lower the state income tax rate to four percent on Jan.1, 2024, the Republican legislature’s House Bill 1.
He said on social media that he had reservations about the bill, which lowers the rate to 4%.
In a Facebook video, Beshear said he would have preferred a reduction in the state sales tax, but the General Assembly didn’t see things his way, and in fact, lawmakers removed exemptions from sales tax in three dozen categories.
“What I’m faced with is a bill that would lower the income tax that has some long-term repercussions for potentially funding state services but will at least put a couple hundred dollars in the pockets of most Kentuckians, at a time when they need it,” he said.
He noted that even with the one-half percent income tax cut taking effect, January revenues were still strong, adding, “I have one bill in front of me, about whether or not we can help our people at this time of high inflation. So today, I’m going to sign House Bill 1. I hope this helps everybody, at least a little bit.”
The House Democratic Caucus issued a statement saying, “Last year, our caucus favored two other tax-cut proposals that would have benefited more Kentuckians more quickly, with one temporarily lowering the sales tax and the other issuing rebate checks. We still think those are much better options, and neither would have put a permanent hole in state spending for schools, public safety and critical health and human services.”
“We look forward to working with Governor Beshear in his second term to restore better balance to our tax system,” said Kentucky House Democratic Caucus Leader Derrick Graham, Cherlynn Stevenson, and NKY’s Rachel Roberts.
The sponsor of HB 1, Rep. Brandon Reed, R-Hodgenville, stated, “Last session the Kentucky legislature took a bold step towards tax modernization with the passage of HB 8, despite the Governor’s veto. As a result, Kentuckians across the Commonwealth saw their individual income tax rate decrease from 5 % to 4.5% on January 1, a tax cut that leaves approximately $625 million a year in the paychecks of working men and women and makes our state more competitive for jobs, workers, and economic investment. HB 1 ensures that we take the next step by lowering the rate to 4% in 2024. Building a strong economy today is how we afford the progress we want for tomorrow. To accomplish that, we must focus on policies that empower working Kentuckians instead of continuing with the status quo.
“I appreciate the Governor signing this measure, as well as his attention to the fact that the legislature’s efforts to reform our state’s tax code and pass policies to make the state more competitive are paying off for Kentuckians.”
The Bluegrass Institute issued a statement applauding the governor’s decision:
“Kentucky has taken another big step forward in placing the Bluegrass State and its citizens on a path toward a more prosperous future.
“HB 1 follows the conditions established by legislation during last year’s General Assembly triggering reductions in the income tax rate if revenues for the previous fiscal year exceed expenses, cover the cost of the tax-rate reduction and maintain a Budget Reserve Trust Fund balance of at least 10% of General Fund revenues.
“Some will claim that Gov. Beshear signed this bill because of the political climate during an election year. Perhaps, but the Bluegrass Institute’s focus is on the policy,” said the Institute’s Jim Waters. “Election year or not, reducing the income tax rate is good policy. It will help grow our Commonwealth’s population and prosperity by allowing Kentuckians to keep more of their hard-earned dollars while helping ensure that state government lives within its means.”
-Kentucky Today and Staff report