Page 1 of 1 LRC 2025-BR195-HB1
COMMONWEALTH OF KENTUCKY FISCAL NOTE STATEMENT
LEGISLATIVE RESEARCH COMMISSION
2025 REGULAR SESSION
MEASURE
2025 BR NUMBER 195 HOUSE BILL NUMBER 1
TITLE AN ACT relating to the individual income tax rate.
SPONSOR Representative Jason Petrie
FISCAL SUMMARY
STATE FISCAL IMPACT: YES NO UNCERTAIN
OTHER FISCAL STATEMENT (S) THAT MAY APPLY: ACTUARIAL ANALYSIS
LOCAL MANDATE CORRECTIONS IMPACT HEALTH BENEFIT MANDATE
APPROPRIATION UNIT(S) IMPACTED:
FUND(S) IMPACTED: GENERAL ROAD FEDERAL RESTRICTED
FISCAL ESTIMATES 2024-2025 2025-2026 ANNUAL IMPACT AT FULL
IMPLEMENTATION
REVENUES ($359 million) ($718 million)
EXPENDITURES
NET EFFECT ($359 million) ($718 million)
( ) indicates a decrease/negative
PURPOSE OF MEASURE: House Bill 1 proposes to reduce the individual income tax rate to
3.5% for taxable years beginning on or after January 1, 2026. The current individual income tax
rate is 4%, effective for taxable years beginning on or after January 1, 2024. The Office of the
State Budget Director verified in correspondence dated August 21, 2024, that the statutory
reduction conditions have been met for fiscal year 2023-2024. For the rate to be reduced, KRS
141.020 requires that the reduction conditions be met and action be taken by the General
Assembly.
FISCAL EXPLANATION : It is estimated that the reduction to the individual income tax rate to
3.5% will reduce General Fund revenues in fiscal year 2025-2026 by approximately $359
million. This estimate reflects reduced withholding and declaration payments in the last two
quarters of fiscal year 2025-2026 due to the rate change.
DATA SOURCE(S): LRC Staff
PREPARER: Sarah Watts NOTE NUMBER: 1 REVIEW: JR DATE: 1/7/2025