A statement by Jason Bailey, director of the KY Center for Economic Policy
The new version of House Bill 8 announced today will have a deeply harmful impact on Kentucky’s budget. It will trigger 1/2-point income tax rate cuts over the next two years, resulting in a 4% individual income tax rate by 2025, which will cost the state $1.2 billion annually. The tiny service taxes in the bill will raise only $100 million a year, leaving a massive hole in future budgets long after the current temporary surplus is gone.
Under just the first two rate cuts in HB 8, Kentucky millionaires, the top 1%, will take home an average annual tax cut of $11,056, while the bottom 60% of Kentuckians will see just $256 on average annually. For most Kentuckians, the pain will come when the state raises sales taxes or taxes groceries to make up for lost revenue, at the same time as austere budgets force schools to cut instructional time, support staff, or student/teacher ratios; cause college tuition to climb higher; and lead to even less access to needed health and human services in communities.
HB 8 will also incentivize future General Assemblies to further undercut critical investments in Kentucky communities in order to achieve incremental income tax rate cuts. This path to lowering the income tax will lock into place increasingly austere investments in public education, human services, and other community needs, while delivering growing tax cuts to the wealthy.
The income tax funds 40% of Kentucky’s state budget, and cutting it as HB 8 demands will deeply damage our ability to fund crucial public services. HB 8 is a fiscally harmful plan that will aid the powerful few while hurting the foundational investments that help all Kentuckians thrive.
Click here to read KyPolicy's analysis of the new version of HB 8.