Ky General Assembly made a good bet on tax reform this session

The people of Kentucky like a good win. The General Assembly likes a sure bet. Enter House Bill 8 — Kentucky’s opportunity to increase its competitiveness through comprehensive tax reform. Thanks to this bill the average Kentucky family will keep nearly $500 more of their hard-earned income next year. And, while Governor Beshear’s decision to veto the legislation was disappointing to be sure, we are thankful our General Assembly took decisive action to override his veto and put Kentucky back on the path to economic competitiveness.

The comprehensive tax reform provided by H.B. 8, gives Kentucky a chance to double down on its economic returns. By adopting a more competitive tax code, Kentucky legislators moved to help working families at a time marked by high inflation, a gas crisis and ongoing supply chain issues.

H.B. 8 uses Kentucky’s budget surplus to reduce the state income tax rate from 5% to 4.5% in 2023. Then, through taxes on discretionary spending, Kentucky is expected to eliminate its state income tax in the next five years. This would put money back into the wallets of the middle-class and improve the quality of life for working families across the state.

This tax reform bill also positions Kentucky to remain competitive against states like Missouri, Ohio, and North Carolina that all reduced their state income taxes last year. By building more competitive tax codes, these states aim to increase economic opportunity for their residents while attracting new families in search of good jobs, safe communities, and a lower cost of living. This passage of this bill puts Kentucky back in the race.

Thanks to the Kentucky General Assembly the state is already benefiting from previous tax reform legislation. The tax reform measures adopted in 2018 and 2019 continue to demonstrate that Kentucky can successfully implement good tax policy that reduces income taxes while still generating the revenues needed to provide a high quality of life for its residents. So far, these initiatives have achieved the ultimate goal of tax reform – for state and local governments to have the ability to pay for the vital government services we need without hindering job and wage growth.

With more and more states looking to win the race to full economic recovery, Kentucky must continue to look to the future to remain competitive. This bill gives Kentucky a new economic development toolkit to help the state attract the high-value jobs and skilled workforce needed to fill those jobs. Kentucky is lucky to benefit from a legislature that is forward thinking enough to ensure the passage of a bill that helps the state attract new residents, support working families, keep college students from relocating after graduation, increase skilled workforce and attract and retain businesses. Lowering – and eventually eliminating – the Kentucky state income taxes will help the state improve its appeal to job seekers in an economy where many people can work from anywhere.

Kentucky’s economy is evolving, and the new tax code will support the long term growth and prosperity for its residents. Kentucky’s General Assembly placed a good bet in passing income tax reform this session. The residents of Kentucky should sleep well at night knowing their senators and representatives will do what is necessary to manage rising costs for families by standing up for meaningful tax reform. Thank you to the state senators and representatives who fought to ensure Kentucky stays competitive for the future.

Kip Eideberg is Senior Vice President of the Government & Industry Relations of Association of Equipment Manufacturers.