Jason Bailey, Executive Director of the Kentucky Center for Economic Policy, raised concerns that the 2022 decision to make permanent cuts to the income tax were made during a time of a budget surplus primarily due to pandemic-related aid. Now, as federal aid diminishes, he says further reductions could lead to a budget shortfall
"A recent state forecast predicted revenues will decline by $213 million this year," said Bailey, referencing the State Budget Director's Quarterly Economic & Revenue Report. "If that materializes, it would only be the fourth time in the last fifty years that revenues have declined year over year. The other times were during recessions, but this one would be during a period of economic growth."
Bailey echoed points made in his KYPolicy piece posted last week, saying that such a shortfall is likely to disproportionally benefit higher income households at the expense of lower income households, and that rural areas of the state stand to be hit the hardest.
Representative Petrie said the measure is intended as a powerful draw to attract new residents and businesses to the state, which has lagged in population growth for decades.
"While other states have continued to grow two, three times our rate - nearby states, not just one, but multiples - they've increased their footprint at the federal delegation level," said Petrie. "Ours has relatively decreased, accordingly."
Kentucky has had 6 congressional representatives since 1993, when it lost one seat following the 1990 census. At that same time, Tennessee gained a seat, increasing its representation from 8 to 9. All other surrounding states have either kept the same number of representatives during apportionment, or lost seats, but nearby neighbors Georgia and North Carolina both gained seats following the 2000 census, increasing from 11 to 13 and 12 to 13, respectively. Georgia's personal income tax is a flat rate of 5.39%, while North Carolina's is 4.25%, and is set to further decrease to 3.99% starting in 2026.
The bill passed with 17 yes votes, 0 no votes, and 3 pass votes, and will be reported favorably for consideration on the House floor.