February 20, 2023 1:20pm
Income tax reduction signed into law
House Bill 1 lowering Kentucky’s personal income tax was signed into law Friday morning. This top priority for lawmakers builds on the tax reform legislation passed in the 2022 session, putting the commonwealth on the path of reducing, and eventually eliminating the individual income tax. HB 1 was a top priority for GLI during this legislative session and positions Kentucky to compete with surrounding states.
Sponsored by Rep. Brandon Reed, Vice Chair of the House Appropriations & Revenue Committee, HB 1 codified the personal income tax reduction from 5% to 4.5% in 2023 and further reduced the rate to 4.0% beginning January 1, 2024.
House Bill 8, passed in the 2022 regular session, outlined a process for the General Assembly to reduce the personal income rate by 0.5% each year, so long as specific revenue triggers are met, and the budget reserve trust fund is funded.
While Governor Beshear vetoed House Bill 8 in 2022, which the General Assembly overrode, he signed House Bill 1 on Friday citing continued income tax revenue growth and the need to offer economic relief to households during high inflation.
This legislation is an important step in continuing to make Kentucky more competitive and attractive for businesses and talent. Read GLI’s statement applauding the passage of HB 1 here.