This month and next, utility customers across the state will receive letters with their bills so they can claim a sales tax exemption on home appliances. his first residence.
Once the utility receives the application, it sits until the owner of the building changes.
This is part of House Bill 8, a tax reform bill passed by the Kentucky Senate last April that goes into effect on January 1st.
State Rep. Steven Rudy of Paducah, who is also the House Majority Leader, is one of 15 sponsors of the bill (all Republicans), including state Rep. Richard Heath. from Mayfield.
“House Bill 8 is tax reform that will create a system to eliminate Kentucky’s personal income tax,” Rudy said. “On January 1, the income tax will be reduced to 4.5% for all people.
“The triggers (budget measures) go later at the end of the fiscal year. We’re hit, so in the next session, we can actually lower it to 4% starting in 2024. That’s probably the House Bill 1 in the 2023 Assembly.”
Rudy said that prior to 2018, Kentucky’s income tax rate was a 6% graduated tax. In the 2018 tax reform, the state raised 5%.
“So, in 2022, we could take that flat 5% to 4.5% and put in a trigger mechanism so if we hit a certain threshold, it would continue to go down and eventually go away,” said Rudy. “There is no mechanism to recover it.
“If at the end of a fiscal year we have enough money to pay all of next year’s budget and the surplus is enough to match the 1% tax on income, we will cut the tax in half.” It is %. the rest goes to the budget savings trust fund”.
Rudy said the rate cut will not destroy the treasury or damage the general fund.
“We have to continue to keep costs down,” he said. “As the economy grows and everything continues, we will hit the threshold and (the income tax rate). If at the end of the fiscal year we take the sample and it’s not done, nothing happens and it stays at the same rate for another year.”
Regarding the housing provision section of Bill 8, Rudy said the assembly closed a loophole.
“The real estate component for primary residences — as far back as I can remember Kentucky tax policy — was to exempt residential properties from the 6% sales tax,” he said. “Companies pay 6% tax on their supplies. All legal non-residents would have paid 6% if the insurance companies had never asked, ‘Is this your primary residence?’
“The people who have two, three or four houses, they took advantage of it, and they didn’t look at the electricity company and they didn’t look at the water company. We put it in language to make sure that you have only one release — only one place. We have instructed power companies that already collect non-residential (business) sales tax to ensure that they only collect one.
For once, the invoice will have a format that allows the customer to say, “This is where I live.”
“They will sign it, and they will never pay the sales tax as long as they live there,” said Rudy.
Rudy said that reforming the sales tax should increase the state’s non-domicile sales tax revenue.
“We’ve also added a sales tax on other things because we want to lower personal income taxes, and if there’s more revenue from those other things, it makes it easier to hitting the trigger to bring us down faster,” he said.
“We added a sales tax on medically unnecessary surgery. Basically we say, ‘If you need and feel you can pay for a nose job, we think it’s a luxury and should be a taxable event. If you have cancer and need rehabilitation, it can be paid for and it’s okay. We’re not talking about that, but these non-Botox and other cosmetic surgeries that are considered medically unnecessary? Yes, we will put a tax on it.”
Rudy announced that the tax will start on January 1st and will apply to this year’s taxes.
“We have decided that we will not spend all the taxpayers’ money, but we will bank on the rain money, which is now more than 10%,” he said. “When we became the majority in 2017, we had the worst rainy day fund in the country. Now, in terms of percentage, we are in the top five.
“It’s just a good fiscal obligation…and we, as Republicans realize that we don’t spend it and spend everything when we have savings, we’re going to save what we can and then we’re going to cut taxes in the event of a recession.” “
Rudy said that the Legislature does not have to cut spending now, but should keep spending where it is.
