By Tom LateK
Kentucky Today
Kentuckians can expect a drop in their individual income tax rate next year, due to legislation enacted by the General Assembly during the 2022 session that ties the income tax rate to state general fund income.
Provisions of House Bill 8 would lower the state’s personal income tax incrementally over a period of years and could even be eliminated entirely.
(Photo by Mehaniq, via Kentucky Today)
Before the rate can be lowered, the state must meet preset triggers from a formula based on how much actual revenues exceed expenses plus the dollar value of a 1% drop in income tax. If that trigger is engaged, the personal income tax decreases by half a percentage point.
Since the first decrease is measured against Fiscal Year 2021 performance, Kentuckians will see the rate lower to 4.5% on January 1, 2023. This would save Kentucky’s taxpayers an estimated $500 million.
The Department of Revenue, with assistance from the State Budget Director’s office, shall review the reduction conditions and report the findings by September 5, 2022. Initially, the reduction conditions for FY21 and FY22 will be considered. After that, each annual review will consider only the most recently completed fiscal year.
The actual revenues and appropriations for FY 22 will not be known until mid-July, since the fiscal year closes on June 30. If the conditions are met and if the General Assembly takes action during the 2023 Regular Session, on January 1, 2024, the rate will decrease again, this time from 4.5% to 4%.
“This is the second major tax overhaul in less than five years, and we have every indication that it will be as successful as the first, which delivered record economic growth and historic job creation, said Rep. Jason Petrie, R-Elkton, the bill’s sponsor and co-chair of the Interim Joint Appropriations and Revenue Committee. “We also have to recognize that it means real relief to working Kentuckians who are facing the impact of inflation.”
Another tax break for Kentuckians was announced by Gov. Andy Beshear on Thursday, when he said he was issuing an emergency regulation to prevent a statutory two cent per gallon hike in the state’s fuel tax from taking
