Kentucky Set for Another Income Tax Cut

Kentucky has met the necessary financial conditions to initiate another reduction in the state's personal income tax rate, which is poised to take effect in January 2026. State budget officials confirmed that the financial triggers had been met, allowing the GOP-dominated legislature to decrease the individual income tax rate from 4% to 3.5%, according to Sen. Chris McDaniel. The legislature may pass this rate cut when it reconvenes next year.

This move marks a reversal from the previous year when Kentucky failed to meet the financial conditions, maintaining an income tax rate of 4%. Since the 2022 tax overhaul by Republican lawmakers, the income tax has been gradually reduced by half-percentage point increments, contingent on meeting revenue benchmarks. The ultimate goal for many supporters of the legislation is to eliminate the individual income tax, shifting the burden toward personal consumption taxes. The overhaul also extended the state sales tax to include more services.

House Appropriations and Revenue Committee Chairman Jason Petrie, who led the 2022 tax overhaul, attributed the latest tax cut to disciplined budgeting decisions. Petrie noted, "We've been willing to make tough decisions…As a result, we continue to see our plan is working." Critics warn that eliminating income tax could deprive essential state services of funds, but proponents believe the revenue benchmarks that have been put in place ensures the funding for necessary services is protected. (This story was generated by Newser's AI chatbot. Source: the AP)