Kentucky House GOP Plans To Pass Income Tax Cut This Week

Jan 4, 2023 at 10:45 am
Kentucky's Capitol Building.
Kentucky's Capitol Building.

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Stivers says Senate will follow in February as advocates caution against basing permanent tax cut on ‘temporary surpluses’

FRANKFORT — Republican House Speaker David Osborne says his GOP supermajority in the House of Representatives plans to pass a bill this week that would continue to cut the state’s income tax, a big priority that GOP leadership telegraphed well ahead of this year’s legislative session.
 David Osborne 
Osborne on the first day of the legislative session said House Bill 1, the vehicle for the further income tax cut introduced Tuesday, would likely be passed out of the House  on Thursday. The legislation would lower the state’s income tax rate from 4.5% to 4%, affirming that various “triggers” of adequate revenues from the previous fiscal year had been met.

“Well, certainly it does take money out of state coffers — about $600 million dollars this year,” Osborne said. “We happen to believe that it’s good policy to allow taxpayers to keep more of their hard-earned money.”

Osborne said taking the income tax rate to 4% would cost state coffers $1.2 billion in 2024.

Senate President Robert Stivers, R-Manchester, told reporters Tuesday that the income tax cut is among House bills that the Senate would likely take up later this week before the legislature recesses until February. Stivers said the Senate would consider final passage of the income tax bill when lawmakers return to Frankfort in February.

“The triggers have been hit,” he said. “It will take place so we will have gone to four and a half. By next year we will be down to 4%.”

 Robert Stivers 
Before the legislature convened, a coalition of advocacy and research groups continued to urge lawmakers to  reject the income tax cut, citing the loss of General Fund dollars that could support services such as education and childcare. Previous cuts as a result of last year’s House Bill 8 will create a loss in the state’s general fund of $247.6 million in the 2023 fiscal year and $487.6 million in the 2024 fiscal year, the groups said.

Natalie Cunningham, outreach director of the Kentucky Center for Economic Policy, a progressive think tank, told reporters that HB8, which set the stage for cutting the income tax again this year, “dangerously uses temporary surpluses to make permanent tax cuts Kentucky can’t afford.” State coffers are still benefiting from federal pandemic aid though that money may soon expire, she said.

“HB8 uses our temporary excess as an excuse for a large permanent tax cut that will squander our current surpluses over time and tear a major hole in future funding for schools, hospitals and other essential needs,” Cunningham said.

When asked if she thought changing the minds of Republicans backing the proposed income tax cut was possible, Cunningham said that while there is support for passing it, “there’s always a hope and a possibility for someone to see another side and understand that our state is worth investing in and our people are worth investing in.”

Erin Doherty Copeland, a member of the Kentuckians for the Commonwealth Economic Justice Council and a psychotherapist, said that with less income tax coming in, programs in areas such as public education, Medicaid and the criminal justice system could see fewer dollars in the future. Paying a higher sales tax to make up for the loss could be a burden for those with lower income, she said.

“The system is already at its breaking point,” Copeland said. “Kentuckians are struggling enough already and lawmakers want to take away money that is meant to benefit all Kentuckians. The funds should be reinvested into our communities so our communities can be healthier, stronger, smarter and safer.”