(Jil Center Square) – Next year, Kentuckians will have a lower personal income tax rate, as authorities announced that the state had met two thresholds needed to trigger a rate reduction from 0.5% to 4.5%.
Earlier this week, Kentucky Department of Revenue Commissioner Thomas Miller advised legislative leaders that the Fiscal Reserve Trust Fund was more than 10% of the state’s general fund and that the total fund general exceeded the general fund credits plus 1% of the personal income tax money. equivalent rate would generate.
These two factors were stipulations included in House Bill 8, which lawmakers passed during the General Assembly session earlier this year. The new law aims to ensure that Kentucky ultimately has no personal income tax and it came after the Republican-led Legislature passed a 6% income tax cut. to 5% as part of a comprehensive tax reform bill four years ago.
“One of the top economic priorities of this General Assembly is to end the short-sighted taxation of production and gradually transform our state’s fiscal model into one that is more conducive to job growth,” he said. said Chris McDaniel, chairman of the state Senate appropriations and revenue committee, R-Ryland Heights, said.
According to the letter Miller sent to McDaniel and State House Appropriations and Revenue Committee Chairman Jason Petrie, R-Elkton, Kentucky’s fiscal year 2022 BRTF was just under 2.5. billion dollars, or 17% of the general fund.
The state’s general fund of $14.7 billion for fiscal year 2022 exceeded appropriations by $373.9 million.
“It is no coincidence that recent years have brought record economic investment to the Commonwealth,” McDaniel added. “It started with the implementation of business-friendly policies in 2017 and accelerated with comprehensive tax reform in 2018. Our commitment to the taxpayers, who make state government operations possible, is to keep foot on the accelerator and more money in their pockets.”
To help offset the income tax reduction, HB8 has added several services to the state’s 6% sales tax. Among the industries added were marketing services, survey firms, lobbyists, web hosting companies, private investigators, personal trainers, cosmetic surgery and interior designers.
The bill also received support from the Kentucky Chamber of Commerce. In a statement, House President and CEO Ashli Watts said the new structure will help spur the growth of the state and make it more competitive with other states from a point of view. from an economic point of view. But she stressed that more needed to be done.
“As our neighboring states continue to take steps to reform their tax codes to attract individuals and businesses, Kentucky must continue to focus on making continued progress in achieving a more tax-based system. consumption,” she said.