Income tax cut bill on the move January 8, 2025 Rep. Jason Petrie, R-Elkton, speaks on House Bill 1, which would reduce the state income tax to 3.5% in 2026, on the House floor on Thursday A high-resolution photo can be found here FRANKFORT — House Bill 1 became the first bill to advance off the House floor in 2025 on Thursday. Sponsored by Rep. Jason Petrie, R-Elkton, HB 1 would reduce the state income tax rate from 4% to 3.5% beginning Jan. 1, 2026. Petrie said the general assembly’s journey to reducing the state income tax began in 2018, but picked up steam in 2022 with House Bill 8. HB 8 established a “trigger” system, which allows the legislature to reduce the income tax rate by either a half or a full percentage point if state revenues reach certain levels. “It is before this body again, per formula, as a good, methodical, thoughtful, cautious approach to reducing the individual income tax rate to zero over time, but not so fast we hurt ourselves, or – more importantly – our constituents,” Petrie said. Eleven amendments were filed to make changes to HB 1 on the floor. Rep. Steven Doan, R-Erlanger, attempted to amend HB 1 to reduce the income tax to 3% in 2025 and bring it to zero by 2028. “States like Texas, Tennessee and Florida have no individual income tax, which has been a significant draw for businesses and entrepreneurs seeking to minimize their tax burden,” Doan said. “By aligning with these states, Kentucky will be poised to see an influx of new businesses and residents, stimulating economic growth.” The House did not vote on the amendment after it was ruled unconstitutional by House Speaker David W. Osborne, R-Prospect. Petrie said reducing the income tax too quickly would lead to a “severe” budget deficit, which is against the Kentucky Constitution. Rep. Adrielle Camuel, D-Lexington, also tried to amend HB 1. She suggested amending the bill to introduce a graduated income tax system, adding she has concerns over the future funding of public education under a consumption-based tax structure. Beginning in 2026, individuals making less than $90,000 annually would be taxed at 3.5% under her proposal. Her amendment would also put individuals making $90,000 to $100,000 in net income to be taxed at 3.75% and individuals making more than $100,000 a year to be taxed at 4%. “Amendment 8 will provide a larger budget revenue stream for Kentucky, fulfill the majority’s efforts to cut taxes for Kentuckians, and also give a greater tax cut and greater financial relief to the people who need it most,” Camuel said. Petrie said he doesn’t support Camuel’s amendment because HB 1 is designed to reduce the tax burden for all Kentuckians. Camuel’s amendment was not adopted. Rep. Chad Aull, D-Lexington, was one of many lawmakers to speak on HB 1 during a more than an hour-long debate on the bill. He said he would be voting “yes” on the legislation, but he still has concerns. “I wish the bill focused more on our working-class families, and was not drafted to disproportionally help those who have the most,” Aull said. House Majority Whip Jason Nemes, R-Middletown, said he has seen the evolution of tax reform in Kentucky since he joined the general assembly in 2017 and it hasn’t happened “in a vacuum,” but with careful consideration and conservative budgeting practices. “This is a conservative approach to a conservative goal,” Nemes said. “This is a long play, and that’s the reason we’re doing this: to help the individual taxpayer, and to grow the pie for all of our people, and we have done that.” The House approved HB 1 by a 90-7 vote. It will now go before the Senate for consideration. The post Income tax cut bill on the move appeared first on The Lexington Times.