Kentucky House votes to reduce the individual income tax rate, a top GOP priority
Rep. Jason Nemes stands to speak to his fellow House members at the Kentucky Capitol in Frankfort, Ky., Wednesday, Jan. 8, 2025. (AP Photo/Timothy D. Easley)
The Kentucky House voted Thursday to reduce the state’s individual income tax rate, as Republicans delivered on a top priority just three days into this year’s 30-day legislative session.
The measure aims to lower the tax to 3.5% from 4% at the start of 2026, continuing a downward trend in the personal income tax rate since Republicans gained full control of the legislature in 2017. The 90-7 House vote sends the bill to the GOP-led Senate, where it has strong support. Democratic Gov. Andy Beshear has signaled his support for the tax cut.
Supporters of House Bill 1 say the lower tax rate will promote long-term economic growth and population gains in the Bluegrass State by enabling people to keep more of the money they earn.
“We are not going to tax our way to prosperity,” Republican Rep. Jason Nemes said in touting the bill.
The bill won united support from House Republicans and from a number of Democrats. For many Republicans, it’s another step toward their ultimate goal of eliminating the individual income tax.
House Democrats backing the bill said they did so to give their constituents some tax relief, but they raised concerns that the lost revenue would jeopardize essential services during an economic downturn. Budget surpluses soared in Kentucky and many other states in recent years, partly due to a massive influx of pandemic-era assistance from the federal government.
“We’re in pretty good shape to do this, so we should do it,” Democratic Rep. Al Gentry said Thursday. “If we do run into some recessionary challenges in the years ahead, I hope and I pray that we have the courage to make tough decisions without cutting much-needed services to people in need.”
Republican Rep. Jason Petrie, chairman of the House Appropriations and Revenue Committee, offered assurances that there’s a “tremendous amount of room to keep the budget balanced” even with a lower individual income tax rate in 2026. Lawmakers passed a two-year state budget last year.
Since Republican lawmakers passed a tax overhaul in 2022, the individual income tax in Kentucky has gradually been reduced by increments of a half-percentage point, conditioned on meeting benchmarks that ensure revenues are sufficient to meet state spending needs. State officials announced last year that the state had met the financial conditions needed to set in motion another cut in the tax rate for 2026.
As part of the tax code overhaul three years ago, the state sales tax was extended to apply to more services. Opponents said that while wealthier Kentuckians disproportionately benefit from a lower income tax, it’s the lower-income families that are hurt the most by putting sales tax on more services.
Some House Democrats said Thursday that instead of cutting taxes, lawmakers should invest considerably more in education, especially for higher teacher salaries and universal access to preschool.
Nemes countered that tax cuts can stimulate more spending, and in turn, that benefits the economy.
“We all want to support the Medicaid programs and the schools and fund all the things that we all care about,” he said. “But you can’t do it by overtaxing folks. We do it by growth. This is a conservative approach to a conservative goal.”