Barren County residents are unlikely to see another cut in Kentucky’s income tax rate after the state failed to meet one of the two required “triggers” for a half-point reduction during the 2024-25 fiscal year.
In 2022, the General Assembly passed House Bill 8, which outlined a plan to gradually reduce the state’s income tax rate with the long-term goal of eliminating it entirely. Governor Andy Beshear vetoed the bill because, while it aimed to phase out individual income taxes, it also imposed taxes on services that were previously exempt.
Under the law, legislators can approve a half-point tax cut only if two conditions are met: the “rainy day” fund must equal at least 10% of the previous year’s total General Fund receipts, and revenues from the prior fiscal year must exceed General Fund spending even if the income tax rate had been one full percentage point lower, according to the Kentucky Lantern.
However, the revenue target fell short. State Senator Chris McDaniel (R) said the legislature “missed hitting that second trigger by about $7.5 million,” calling it “a very small amount in the context of annual revenues of about $15 billion.”
Lawmakers previously reduced the income tax rate from 5% to 4.5% in 2022, then to 4% in 2023, and again to 3.5%, effective January 1, 2026.
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