In a news report Thursday, the chair of the Senate Committee on Appropriations and Revenue confirmed that Kentucky missed targets allowing legislators to vote on another cut to the state income tax in the 2026 legislative session.
Upon the news, KyPolicy Executive Director Jason Bailey released the following statement:
“The state did not meet the Kentucky General Assembly’s revenue and spending hurdles for another income tax cut, despite the legislature moving the goalposts to make achieving it easier and an unexpected bump in notoriously volatile corporate tax receipts. The state failing to meet its tax cut trigger this year is a small sigh of relief for every Kentuckian who relies on the success of our schools, hospitals and other vital services. But it comes on top of news of an expected shortfall this fiscal year due to the income tax cuts the legislature has already made and a weakening economy due to unwise federal policies.”
“On top of falling income tax receipts, Kentucky must deal with major new cost-shifts coming from the harmful megabill that passed Congress this summer. It is time to bring an end to the wrong-headed goal of eliminating the state’s largest revenue source, a policy that — like that new federal law — overwhelmingly benefits the wealthy.
“Kentucky began this tax-cutting experiment at a unique moment in history. Federal COVID stimulus spurred huge increases in state tax revenue while pandemic-induced inflation made those increases seem bigger than they actually were. That period, where there seemed to be ‘extra money,’ has now ended. Making huge permanent tax cuts based on temporary conditions was always a losing bet.
“While the ‘march to zero’ on the income tax should be halted for good, the 42% drop in the state’s top rate already enacted will cause damage in the coming years. Ultimately Kentucky will have to raise additional revenue by fixing its upside-down tax code so that those at the top pay what they owe for the services that benefit us all.”
