FRANKFORT, Ky. (LEX 18) — The new year will bring changes to the Kentucky tax system.
In 2023, House Bill 8 will go into effect, and it will lower income taxes but expand sales taxes to additional services in Kentucky.
The Republican-led legislature passed the measure this year with the goal of ultimately getting rid of income taxes. In 2023, income tax rates will drop from 5 to 4.5%.
However, 35 previously untaxed services will now be subject to sales taxes. They range from short-term rental services to repairs on household items to cosmetic surgery.
Utilities like sewer services, water, electricity, etc. will also be subject to sales taxes in 2023. Utilities at your primary residence are exempt. However, many Kentuckians may need to fill out exemption forms with their utility companies to avoid the tax.
Governor Andy Beshear tried to stop these tax changes from going into effect by vetoing House Bill 8 earlier this year. However, the legislature overrode that veto.
"During the last general assembly, the supermajority raised taxes," said Beshear. "That's the only way to put it. They added sales tax to a whole bunch of things."
"And they did it at a time when prices were already going up so it’s sales tax on even higher prices," he added. "Think about what it’s going to cost to heat our homes this winter, which is going to be more than normal."
Beshear believes sales taxes should temporarily be lowered as people struggle to afford things with inflation. He worries the additional sales taxes will hurt those who are already struggling.
"Those additional sales taxes are wrong and I'm against them," Beshear said. "And if people dislike them now, if this General Assembly claims they want to switch to a total sales tax economy and no income tax at all, not only are we going to see sales tax on a ton of different things, but it's going to end up going up like it has in other states."
However, Republican lawmakers stand by their tax reform measure. They believe that lowering and ultimately getting rid of income taxes will save Kentuckians money.
"$600 million plus a year off the first reduction remaining in the taxpayers' pockets across the Commonwealth," said Rep. Jason Petrie during the signing of House Bill 8.
