The Republican supermajority in Frankfort followed through on their plans to quickly advance a bill to cut taxes, passing it out of the House on just the third day of Kentucky General Assembly’s 2025 session.
House Bill 1 would cut Kentucky’s individual income tax rate from 4% to 3.5% percent beginning in the 2026 calendar year. A fiscal note attached to the bill projects it would decrease state revenue by $359 million in the first half of 2026, and then $718 million annually going forward.
The bill cleared the chamber by a wide 90-7 margin, with all Republicans present voting for it. Though several Democrats expressed their concern about the long-term implications of another tax cut, a majority of its caucus members voted in favor of the bill.
The legislation will likely receive final passage in the Senate once lawmakers return from a three-week break in February.
The potential tax cut of HB 1 is made possible by the state hitting specific budget triggers last year.The Republican supermajority in 2022 created a mechanism to incrementally cut the income tax rate by half a percentage point each year until it is eliminated, so long as the state’s revenue, spending and budget reserve trust fund reach certain levels.
Though all Republicans voted for HB 1, one GOP member unsuccessfully attempted to attach an amendment that would have cut taxes much faster and deeper.
The floor amendment of Rep. Steven Doan of Erlanger would have cut the tax rate immediately to 3%, along with annual cuts of a percentage point going forward. He said many of his constituents are concerned that the current trigger mechanism will never get Kentucky’s income tax rate to 0% and may never drop it lower than 3%.
As Doan pointed to states such as Texas, Tennessee and Florida that have eliminated income taxes and experienced higher economic growth than Kentucky, he was cut off by GOP leadership, who ruled his amendment out of order, preventing a vote.
Rep. Jason Petrie, the GOP chairman of the House budget committee from Elkton, said cutting the tax rate by an additional percentage point would create a $1.37 billion loss in revenue and create a “severe deficit,” which is in violation of Kentucky’s constitutional requirement of a balanced state budget. House Speaker David Osborne of Prospect said House rules prevent the body from taking up a measure that directly conflicts with the constitution.
Republican leadership in both chambers have indicated that despite the state hitting the budget triggers for a tax cut last year, the economic forecast ahead shows the chances of hitting these triggers for cuts in the coming years is quite low, unless other major structural changes are made to the budget.
Members of the GOP supermajority say the trigger mechanism and incremental cuts were put in place to avoid lowering taxes too quickly and having to make emergency cuts to vital government services, such as when Kansas had to reverse its large tax cuts a decade ago.
Critics of this system have countered that it creates permanent tax cuts in the face of a projected decline in revenue over the near term, as the temporary surpluses created by the large federal stimulus and pandemic-spurred global inflation in recent years will soon run dry and morph into deficits.
Most Democrats vote for bill, after attempts to amend
Democratic members also unsuccessfully attempted to attach two floor amendments to HB 1, which would have added a $1,000 tax credit for families’ child care and housing expenses and created a graduated income tax rate.
The tax credit amendment was ruled out of order, while the amendment to only lower taxes for those making less than $100,000 annually was voted down in a party-line vote.
Speaking against the latter amendment, Petrie said it was “counterproductive to what we're attempting to do, of actually lowering taxes and lowering revenue streams.”
Several Democrats spoke of their concern about the tax cut, but said they would ultimately vote for it because people needed some relief in the current economic climate.
Rep. Chad Aull of Lexington said the tax cut would provide an additional $12 per paycheck for the average household in Kentucky, which “is a lot better than nothing.”
“$12 a paycheck may not seem like a lot to a lot of people in this chamber, but it could mean a whole lot to that family who's struggling to buy groceries, make payments,” Aull said.
House Democratic Leader Pamela Stevenson of Louisville said this was a difficult vote, as people need relief, but there is concern that revenue shortfalls could lead to cuts in education and Medicaid coverage. She also noted that Kentucky is not in the unique position of states like Texas, Tennessee and Florida to eliminate its income tax.
“I hate to be the one to tell you, but we don't have oil, we don't have Dolly and we don't have Mickey,” Stevenson said. “We don't have those types of tourism dollars going into this state.”
All members of House Democratic leadership voted for HB 1, with Gentry saying he hoped Republicans would take action to reverse the cuts if the economy plunged.
“If we do run into some recessionary challenges in the years ahead, I hope and I pray that we have the courage to make tough decisions without cutting much-needed services to people in need,” Gentry said.
Rep. Jason Nemes, a member of GOP leadership from Louisville, said Republicans will now have lowered Kentucky’s income tax from 6% to 3.5% since they took back the House majority in 2017, a drop that he said will provide the average household a $1,540 tax cut.
Speaking to Democrats, Nemes said “if you vote no, you are voting to raise taxes on Kentuckians — $700 million — and your voters will know about it,” which brought applause from his Republican colleagues.
Rep. George Brown Jr. of Lexington was the only Democratic member to speak about why he voted against the bill. He said the damage it could cause to the state was more important than any negative political ads Democrats may face in the next election over their vote.
“We've got to be strong and have intentional fortitude to stand and speak truth to power,” Brown said. “We're not always going to win, but we have to stand up and say it.”
The Senate budget committee is expected to pass HB 1 Friday, but the General Assembly will then take a three-week break. The Senate is expected to give HB 1 final passage once lawmakers return in February.
Despite sharing some concerns about the tax cut, Democratic Gov. Andy Beshear signaled last month that he would sign a bill to do so.
State government and politics reporting is supported in part by the Corporation for Public Broadcasting.
