Gov. Andy Beshear has signed into law another reduction to Kentucky’s individual income tax.
Lowering the tax rate has been a priority in recent years for Republican lawmakers, who passed another half-point reduction in this year’s legislative session. The latest cut is expected to save taxpayers another $718 million annually.
The Kentucky House approved the tax cut on the third day of this year’s session in early January. The Senate took up the bill Tuesday, the first day that lawmakers reconvened since the January break.
In signing the bill on Thursday, Beshear said while Kentucky has what he called a booming economy, many items cost too much.
“You go to the grocery store and see prices going up," Beshear said in an online video. "You fill your car with gas and you worry about the other bills at the end of the month, and right now in Washington, DC, we have threatened tariffs that would raise prices on virtually everything.”
Kentucky’s personal income tax rate will drop from 4% to 3.5% percent on Jan. 1 of next year.
The GOP-dominant General Assembly began an effort in 2022 to gradually reduce the income tax until it’s eliminated.
Democrats have expressed concern since that revenue is crucial to state coffers, but Beshear maintains the commonwealth can afford to make the latest cut, despite slowing revenue growth.
Reductions to the income tax are conditioned on meeting certain triggers to ensure the state has enough revenue to meet its spending needs.
Supporters say a lower tax rate will promote economic growth by allowing Kentuckians to keep more of the money they earn. Opponents say it disproportionately benefits wealthy Kentuckians.
