Kentucky Governor Andy Beshear, a Democrat who's been in office since 2019, signed a GOP-backed bill into law on Thursday which will reduce personal income taxes for millions of Bluegrass State residents.
The cost of the tax cut will be offset by the state's long-term economic growth, according to Beshear, only the third governor in Kentucky's history to win two consecutive terms. Newsweek contacted Beshear's office for comment by email on Friday morning.
Why It Matters
During his 2024 presidential campaign, Donald Trump ran with the promise of cutting taxes for millions of Americans, including eliminating taxes on tips and on Social Security benefits for seniors.
His return to the White House has spearheaded and galvanized similar moves in GOP-led states, where lawmakers are trying to introduce further tax cuts even as they've already implemented some in the past few years—and even as state revenues are dwindling or stagnating.
What to Know
House Bill 1, signed by the Kentucky governor into law on Thursday, will lower the personal income tax rate from 4 percent to 3.5 percent starting next year, helping Kentuckians struggling with the stubbornly high cost of living.
The plan was backed by the Republican-led legislature of the red state, who have passed similar legislation since gaining full control of the Kentucky State House and State Senate in 2017. The Kentucky House voted 90-7 to lower the state's individual income tax rate, and the Kentucky Senate voted 34-3.
Democrats in the Kentucky legislation, on the other hand, were a little more conflicted on the tax cuts, with some saying the lost revenue produced by the tax cuts might jeopardize public services in the state. Most voted in favor to offer financial relief to Kentuckians.
Beshear said on Thursday that the tax cut would cause the state a loss in revenues of $718 million annually once implemented. Kentucky's general state fund finances public services such as education and health care.
Kentucky already introduced legislation in 2022 gradually cutting the individual income tax by increments of half a percentage point on the condition that revenues are sufficient to meet state spending needs. The move was part of an overhaul aimed at eventually phasing out the state's individual income tax altogether which also extended the state sales tax to more services.
At the time, Beshear opposed the overhaul and even vetoed it, but was easily overridden by Republican legislators.
What People Are Saying
Michael Adams, Kentucky Secretary of State, wrote on X: ""My Office has received House Bill 1, with the signature of the Governor."
Beshear said on Thursday: "This move will put more money in your pocket while things cost too much. I believe that with the growth we're seeing in certain areas of revenue, that we're going to be able to manage that."
Republican Rep. Jason Nemes said of the bill, as reported by Lex18:"We are not going to tax our way to prosperity."
Democratic Rep. Al Gentry said on Thursday: "We're in pretty good shape to do this, so we should do it. 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."
What's Next
While the idea of saving money on the personal income tax will likely be enticing to Kentuckians, questions remain over whether cutting taxes can be a sustainable path for states' budgets.
Republican State Rep. Jason Petrie, chairman of the House Appropriations and Revenue Committee, said on Thursday, as reported by Lex18, that there's "tremendous amount of room to keep the budget balanced" even with the suggested cuts.
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