Greater Louisville Inc.: House Files State Tax Modernization Bill

Press release from Greater Louisville, Inc.:

2022-02-25

Earlier today, House Appropriations and Revenue Chair Jason Petrie filed House Bill 8, which would lower the state’s 5% income tax incrementally over a period of years until it is eliminated. The first decrease would reduce the income tax rate an entire percentage point to 4% on January 1, 2023.

The bill requires the state to meet additional revenue targets before additional rate reductions can occur. The thresholds are based primarily on organic increases in state revenues together with an expansion of the base of items subject to sales tax. Lawmakers used conservative revenue forecasts based on the work of the Consensus Forecasting Group (CFG) and available sales tax data to predict future state revenues.

Provisions of HB 8 aimed at broadening the tax base to include extending the sales tax or a user fee to the following services as well as others listed in the bill:

The measure also implements a battery reclamation fee on electric and hybrid motor vehicles and a tax on the use of fee-for-service charging stations. Revenue raised through these mechanisms would be earmarked for the state road fund and general fund.

HB 8 includes no reduction in the corporate income tax or the limited liability entity tax (LLET), nor does it include a rumored expansion of the sales tax to traditionally non-taxed items like groceries and medication.

GLI advocacy staff is reviewing the proposal and will provide more details and analysis.

This press release was produced by Greater Louisville, Inc.. The views expressed here are the author’s own.