House Passes Tax Overhaul Bill

The House of Representatives approved a measure on Friday that could eventually eliminate the state’s individual income taxes. House Bill 8 would lower Kentucky’s 5% individual income tax incrementally over years if the state’s General Fund receipts meet specific benchmarks. Kentucky could eventually eliminate individual income taxes and shift the tax structure toward an almost exclusive consumption-based model.

The House of Representatives approved the measure 67-23 after more than three-and-a-half hours of debate. House Appropriations and Revenue Committee Chairman Jason Petrie (R-Elkton) sponsored the bill.

House Bill 8 would broaden the sales and use tax base by taxing additional services, including vehicle rentals, security systems, parking, event space rentals, and cosmetic surgery. Petrie stressed that the bill does not tax groceries or medicine and would not impact corporate income taxes.

The bill now heads to the Senate for consideration. That chamber also has in its possession House Bill 475, the constitutional amendment that would allow the General Assembly to reform local government tax policies comprehensively. The measure is another step toward modernizing Kentucky’s tax structure to ensure the commonwealth remains competitive with neighboring states.

House Bill 475, KLC’s top legislative priority, awaits a Senate committee hearing.