Senate advances income tax cut bill

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Senate advances income tax cut bill February 4, 2025
Sen. Christian McDaniel, R-Ryland Heights, speaks on House Bill 1 during Tuesday’s floor proceedings in the Senate. The measure, which would reduce the state income tax rate, received Senate approval. A high-resolution photo can be found here
FRANKFORT — A measure to cut the income tax rate in Kentucky – House Bill 1 – was the first bill in 2025 to gain Senate approval.
With a 34-3 vote on Tuesday, the Senate approved the measure that would reduce the state income tax rate from 4% to 3.5% beginning Jan. 1, 2026. The House approved the bill in early January by a 90-7 vote and it now heads to the governor.
Sen. Christian McDaniel, R-Ryland Heights, and chair of the Senate Appropriations and Revenue Committee, said the general assembly created certain “triggers” several years ago to allow for the gradual lowering of the Kentucky income tax. The triggers require state coffers to meet savings and surplus thresholds before the tax rate can be lowered.
“It’s been said that there are only two things in life that are certain: death and taxes,” McDaniel said. “…In the last seven years, we’ve added another thing that’s fairly certain, which is the general assembly is going to do everything in its power, and frequently with success, to lower your taxes. And that’s what House Bill 1 is all about.”
Sen. Aaron Reed, R-Shelbyville, voted for the bill, and said it’s part of a “journey” to reduce the state income tax rate to zero.
“Let’s tackle the root of the problem by controlling spending and empowering our citizens. This tax cut will boost our economy and put more money back in the pockets of Kentuckians,” he said. “I vote yes for growth, yes for fiscal responsibility and yes for the future of the prosperity of our great state.”
However, a few lawmakers cited concerns with the plan during debate on the chamber floor.
Sen. Karen Berg, D-Louisville, voted against the measure. She acknowledged that the bill is popular, but said it is “putting way too many apples in a basket we can’t get a hold of if we need.” She also said she’s concerned about risks with the bourbon industry in Kentucky and tariffs.
“Obviously, these are things that sound very attractive to people, very attractive,” Berg said. “I may be socially liberal, but I am extremely fiscally conservative, and I honestly know that sound finances is that you pay your bills first. You make sure that you’re solvent, and you have enough money to cover exigencies as they come across.”
Sen. Cassie Chambers Armstrong, D-Louisville, also voted against the bill. She said she appreciates the intent of the legislation. However, she’s concerned that the people who are making the most money stand to receive the most benefits from the reduction.
“I also worry about cutting our revenues at a time of such economic uncertainty. We don’t know what tariffs, if any, might be coming. We don’t know what federal funds, if any, might be going away. We don’t know what impact, if any, that’s going to have on us here in this state,” she said.
But Sen. Michael J. Nemes, R-Shepherdsville, argued in favor, saying it’s a great thing for people to keep more of their money.
“They earned it. It’s their money, not ours. We think we know better what to do with their money than they do. I’m telling you, we do not,” he said.
Senate Minority Whip David Yates, D-Louisville, also voted for the bill, and said the measure shouldn’t have anything to do with partisanship.
“I tried to talk to our nonbiased economic advisers about what would happen in going from a 4% to a 3.5% in our climate today is still safe. I do have fears of the future and I know how hard it is in order to reverse something like this,” he said.
The Senate is adjourned until Wednesday at 2 p.m.
News Releases are provided by the LRC Public Information Office. All photos are attributed to LRC Staff.
https://apps.legislature.ky.gov/publicservices/pio/release.html#Tax020425