Fulfilling comments he made earlier, Gov. Andy Beshear has signed House Bill 1, which drops Kentucky’s income tax rate by one-half percent, to three-and-a-half percent, and was the first bill to reach his desk during the 2025 General Assembly.
The measure, which takes effect on Jan. 1, 2026, builds on the structured income tax reduction plan that was established by 2022's HB 8, which provides that the rate can be lowered by one-half percent based on the amount of money in the Budget Reserve Trust Fund, also known as the Rainy Day Fund. This is the third half-percent reduction since the legislation was enacted.
In remarks he made on social media before signing the bill, Beshear said: “We have a booming economy in Kentucky, and we have broken every record for private sector investments, for new jobs and for new wages. But I know that right now, things cost too much for our families. That you go to the grocery store, and you see prices going up. You fill your car with gas, and you worry about the other bills at the end of the month.”
The governor said he knows the bill enjoyed wide support from Republicans and Democrats alike, “but in the end, I support it because it’s going to help you. I will always do what’s best for our families. That’s my job.”
The first two rate reductions have saved taxpayers in Kentucky an estimated $1.8 billion. The latest authorized reduction through HB 1 is expected to save them an additional $718 million annually.
Per the Kentucky constitution, all appropriations and revenue-related legislation must originate in the House. HB 1 passed that chamber with overwhelming bipartisan support, 90-7, before moving swiftly through the Senate, where it was approved on a 34-3 vote.
The Kentucky General Assembly’s 30-day regular session is scheduled to end on March 28.
