Bluegrass Times

Earlier this month, Governor Andy Beshear signed House Bill 1 into law, establishing a state spending plan that aims to reduce income tax rates and assist small business owners in retaining more of their earnings.

NFIB State Director Tom Underwood expressed support for the legislation, stating, “Our small business members applaud the General Assembly for their fiscal restraint and ability to plan for the long term.”

The bill introduces changes to Kentucky's tax laws by reducing the individual income tax rate. Starting January 1, 2024, the rate will decrease to 4%, with a further reduction to 3.5% slated for 2026.

Underwood highlighted the benefits of these reductions: “Lower tax rates mean small business owners will have more money to improve their businesses, hire workers, and expand.” He noted that most small businesses in Kentucky are organized as pass-through entities, which means profits are taxed at the individual level.

House Bill 1 includes provisions for additional tax cuts if Kentucky's financial health allows. The state must maintain a robust savings fund and sufficient revenue to meet its expenses. If these conditions are met, further tax reductions could be implemented.

“This is a commonsense approach to easing the financial pressure on taxpayers while ensuring that Kentucky’s budget is balanced and that our economy is strong,” Underwood said.