Promises Kept: Lowering the income tax means rewarding work, attracting investment, increasing competitiveness

Legislative Update

By Representative Matthew Koch

On January 1, Kentucky took another meaningful step toward a more competitive, more prosperous future and every single working Kentuckian can see the results in their next paycheck. Our individual income tax rate officially dropped to 3.5%, continuing the legislature’s long‑term commitment to phasing out the tax entirely. This is not just a number on paper, it is a statement of principle. It reflects our belief that Kentuckians, not Frankfort, should decide how to spend the money they earn.
Our goal is simple: eliminate the individual income tax entirely. Not overnight, not recklessly, but responsibly through measured reductions tied to clear fiscal benchmarks. This approach ensures that we protect essential services while still moving Kentucky toward a tax structure that rewards work, attracts investment, and makes our state competitive with our neighbors.
This year’s reduction builds on the work we began several sessions ago, including HB 1 in 2022. That measure set the framework for responsible, data‑driven rate cuts tied to revenue triggers and economic performance. Economists estimate that the most recent reduction will leave approximately $718 million in the pockets of Kentucky taxpayers in the first full fiscal year of implementation. That is $718 million that families can use to pay bills, invest in their futures, or support local businesses, rather than sending it to the state to be redistributed.
The Wall Street Journal recently highlighted the national trend of states lowering income taxes, noting that “marginal rate cuts on the next income dollar increase the incentive to work – and for people to remain in the state.” That principle is at the heart of our approach. When we reduce the penalty on work, we reward productivity. When we allow Kentuckians to keep more of their paychecks, we strengthen our workforce and our economy.
The Journal also pointed out that lower income‑tax rates serve as “a discipline on politicians who want to spend whatever revenue they can grab.” I could not agree more. A government that grows simply because it can is not serving its people. If a government grows, it should be to meet the needs of thriving citizens and a growing economy. Lower tax rates ensure that the government does not grow at the expense of working families.
We have already seen the benefits. Businesses are taking notice. Families are choosing to stay. Entrepreneurs are choosing to build here rather than elsewhere. Every step we take toward eliminating the income tax sends a message that Kentucky is open for growth, open for innovation, and open for opportunity.
Meaningful work – real reform that reshapes a state’s economic future – never happens by accident. It takes persistence, discipline, and, at times, the willingness of the legislature to stand firm when the governor tries to slam on the brakes. The Wall Street Journal noted that in Pennsylvania, “the rate cut was pushed by Republicans in Harrisburg, not by Democratic Gov. Josh Shapiro—though perhaps he’ll take credit for it if he runs for President.” That observation hit close to home. Here in Kentucky, we saw the same dynamic play out when lawmakers had to override the governor’s veto to pass HB 1 in 2022. And yet, despite his attempt to block it, he now seems more than willing to bask in the glow of its success. It is a reminder that progress often requires the legislature to lead boldly and to stay the course even when others try to claim the credit after the fact.
As we convene this year’s legislative session, I am optimistic about where we are headed. We are demonstrating that fiscal responsibility and improving our quality of life are not mutually exclusive – they are mutually reinforcing. By continuing to lower the income tax and finding ways to ensure state government works for the people and not the other way around, we are building a stronger foundation for future generations and ensuring that Kentucky remains a place where hard work is rewarded, not penalized.
The future is bright for our Commonwealth. And as long as I have the privilege of serving, I will continue working to ensure that Kentucky families keep more of what they earn and that our state remains on a path toward lasting prosperity.
However, our work is far from done and we will convene the 2026 Regular Session on January 6. Want to follow along? The Legislative Research Commission (LRC) is the legislature’s administrative arm and maintains a helpful, information-packed website. It contains every bill and resolution, schedules, contact information, and information about the legislative process. For decades, Kentucky Educational Television (KET) has televised committee meetings and the work we do on the House Floor. In addition, the legislature now offers a YouTube channel and broadcasts live from all committees and the House and Senate. To access the KET and YouTube coverage, visit www.legislature.ky.gov and click on “Live Coverage.”
As always, I can be reached anytime through the toll-free message line in Frankfort at 1-800-372-7181. You can also contact me via email at Matthew.Koch@kylegislature.gov and keep track through the Kentucky legislature’s website at legislature.ky.gov.