Republican lawmakers wrapped up work on a bill making a deeper cut in Kentucky's individual income tax rate, sending the election-year issue to the Democratic governor on Wednesday.
The bill won Senate passage on a 30-5 vote after an hourlong debate.
For Republicans, it's another step toward achieving a long-running goal to phase out individual income taxes in Kentucky. The attention will shift in coming days to whether Gov. Andy Beshear — who is seeking a second term this year — will sign the measure.
The measure would lower the individual income tax rate by a half-percentage point to 4%, effective Jan. 1, 2024. It follows up on last year's tax overhaul, which resulted in a reduction of the tax rate from 5% to 4.5% at the start of this year. The new measure finalizes that cut.
Republicans said Wednesday that the ongoing rate cuts will benefit working-class Kentuckians while promoting further economic gains and population growth.
“I say to the people who do get up and go to work every day, and pay those income taxes, this is for you," said Republican Senate Majority Floor Leader Damon Thayer. "Now you get to decide how much tax you pay by how much you consume.”
Democrats opposing the measure said many Kentuckians won't reap savings from the rate cut. They noted that last year’s legislation also extended the state sales tax to more services.
“I hope that we’ll be honest with our constituents and quit calling it a tax cut and ... better explain this is a restructuring of our tax structure," said Democratic Sen. David Yates. "And that the majority of Kentuckians will be paying more money out of pocket at the end of the year.”
The revenue gained from broadening the sales tax base will fall far short of making up for the revenue lost from the income tax cut.
As part of last year's tax overhaul, Republican lawmakers included certain fiscal conditions that have to be met to trigger incremental drops in the state’s personal income tax rate.
“The safety valves are built in in such a way that I'm confident that we will be able to sustain the growth of the economy in Kentucky and meet the needs of our citizens as it relates to state government,” Senate President Pro Tem David Givens, a Republican, said Wednesday.
But the bill's detractors say cutting the individual income tax will deprive the state of funds needed to bolster spending on education, public safety and other priorities. Yates called it a missed opportunity to make deeper investments in programs “that pay back dividends” for the state.
