Kentucky lawmakers have passed a bill to reduce the state’s individual income tax rate from 4% to 3.5% starting in 2026. This move, supported by Republican legislators, aims to promote economic growth and attract population gains by allowing residents to keep more of their earnings. The bill now awaits the signature of Democratic Governor Andy Beshear, who has indicated his support for the tax cut.
While supporters believe that the lower tax rate will benefit all Kentuckians, some opposition from Senate Democrats, like Sen. Cassie Chambers Armstrong, suggests that wealthier individuals will disproportionately benefit from the reduction. Armstrong has proposed alternative options for tax relief that would specifically support low-income families.
Despite concerns about the impact on state revenue, Republicans are pushing for further reductions in the income tax rate, with the goal of eventually eliminating it entirely. The state has already seen gradual reductions in the income tax rate since a tax overhaul in 2022, with incremental decreases tied to fiscal benchmarks. The recent passage of this bill marks another step towards achieving the long-term goal of eliminating the individual income tax in Kentucky.
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