The 2026 Kentucky legislative session is just around the corner, with legislators scheduled to convene in Frankfort next Tuesday for Day 1 of the session.
The main focal point will be on crafting the state’s budget for the next two years, but State Representative Josh Branscum said the legislature will examine different issues as well. He expects one of those to be potentially cutting the state income tax again.
The state income tax is set to decrease from 4 percent to 3.5 percent beginning tomorrow as part of a bill passed in 2022 aimed at lowering the tax in half-a-percent increments with the end goal of having no state income tax similar to states like Tennessee and Florida.
Branscum said the legislature wanted to be strategic in the way it lowered the tax and avoid potentially messy situations that other states have found themselves in.
Part of that strategy was implementing a pair of metrics for the state to meet to trigger a reduction in the tax.
The first metric is the state budget reserve trust fund is at least 10% of General Fund revenue at the end of a fiscal year. The other is such revenue would have exceeded General Fund spending even if the tax rate had been one percentage point lower.
It was reported over the summer that the state’s General Fund revenue fell $7.5 million short of what was needed to trigger cutting the tax rate from 3.5% to 3% in 2027.
Despite missing the metric, Branscum said he expects the legislature will discuss moving forward with the tax reduction for 2027.
