(LEX 18) — The Kentucky House voted 90-7 to lower the state’s individual income tax rate on Thursday.
Republicans delivered on a top priority just three days into this year’s 30-day legislative session as they moved on House Bill 1. The bill would lower the tax to 3.5% from 4% at the beginning of 2026.
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. The ultimate goal is to eliminate income tax in Kentucky.
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.
Nemes told lawmakers that since they've reduced the income tax from 6% to 4.5%, it has saved Kentucky families a lot of money.
"You - if you voted for these things - have reduced taxes on the average Kentucky household by $1,549.50," said Nemes. "$1,549.50 on the average Kentucky household. That’s a lot of food. That’s a lot of clothing."
Some House Democrats voiced concern over the bill, saying they were torn on what to do. They raised concerns that the lost revenue would jeopardize essential services during an economic downturn. However, several voted yes on the bill, saying they did so to give Kentuckians some tax relief.
"This cut roughly would equal about $12 a paycheck for an average household Kentucky income of about $61,000. $12 a paycheck may seem like a lot to a lot of people in this chamber, but it can mean a whole lot to that family who is struggling to buy groceries, make payments," said Rep. Chad Aull.
“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.
As part of the tax code overhaul three years ago, the state sales tax was extended to apply to more services. Critics 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.
"When I talk to my neighbors, they often feel that it’s a wash. They don’t feel like there’s any more money in their pocket and in fact, there’s not," said Rep. Rachel Roarx. "They end up spending it on increased services for the increased sales taxes on over 70+ services that they now pay 6% tax on."
The bill will now go to the GOP-led Senate, where it has strong support. Democratic Gov. Andy Beshear has also signaled his support for the tax cut.
