Income tax cut bill passes easily out of Kentucky Senate committee

A top priority for Republicans in the Kentucky legislature, a bill that would further cut the state’s income tax, sped out of a Senate committee easily Wednesday morning.

The comments of support by GOP lawmakers for House Bill 1 and testimony critical of the bill mirrored past discussion surrounding the legislation when it sailed through the Kentucky House of Representatives last month. 

Sen. David Givens, R-Greensburg, in voting for the bill said “safety values” are built into the legislation — such as the balance of the state’s rainy day fun must be at least 10% of the state’s General Fund receipts for the last fiscal year —  as the income tax is continued to be cut to make sure the state government is meeting the needs of citizens. 

“We arrived at this in a very delicate manner,” Givens said. “This was not a hasty piece of document that was proposed.”

Givens told the Lantern he expects the bill to be heard on the Senate floor Wednesday afternoon, with the legislation poised for a vote. Democratic Gov. Andy Beshear told LINKnky in late January that he would “carefully” consider House Bill 1 and wouldn’t say whether he would veto the legislation. 

HB 1 would continue a series of tentative income tax cuts put in place by legislation passed by the GOP-dominated legislature last year. That 2022 bill slashed the state’s income tax from 5% to 4.5% and allows the legislature to cut the income tax by another half percent if the state meets fiscal triggers allowing for a further cu., ending the fiscal year on a strong financial foundation. HB 1 would continue to cut the income tax to 4%, effective at the start of 2024. 

Pam Thomas, a senior fellow with the progressive research group Kentucky Center for Economic Policy, testified again against the legislation after previously doing so before a House committee last month. 

Her comments treflected criticism made previously by a coalition of groups against the bill, saying that currently flush revenues and monies in the state’s rainy day fund are temporary due to in part pandemic-era federal stimulus dollars flowing to states, and that investments are needed in areas such as education and to help disaster survivors across the state. 

“They’ve got a very large budget reserve trust fund that they can draw on if they need it, to prop up revenues,” Thomas said. “But you know, the really scary thing, honestly, is that there just aren’t a lot of places for them to go to raise revenue outside of the income tax if they keep on the course.” 

Sen. Chris McDaniels, R-Ryland Heights, who chairs the Senate Appropriations and Revenue committee, said getting to a goal of a zero percent income tax rate may take a decade at minimum. 

He said he believed Thomas had valid points in her arguments, saying that each state has assets it can draw from for tax revenue – such as oil in Texas or tourism in Florida — and states need to account for that in creating its tax structure. But he remained confident that the bill has the necessary safeguards in place to cut the income tax. 

“The compelling narrative for the commonwealth is if we’re going to attract and retain the good, high quality organizations that bring good high quality jobs, we have got to be more competitive on the income tax policy,” McDaniel said.