As expected, Democratic Kentucky Gov. Andy Beshear signed into law another cut to the state’s individual income tax rate Thursday, saying that “things cost too much for our families” despite a “booming economy.”?

Beshear speaking in a video posted on X, formerly Twitter, said worries about increasing prices at the grocery store and gas pump are coinciding with the threat of tariffs implemented by the Trump administration that “would raise prices on virtually everything.” The Democrat said signing into law another income tax rate cut is about giving money back to Kentuckians amid higher prices.?

However, an analysis by the Kentucky Center for Economic Policy shows the greatest savings from the income tax cut will overwhelmingly flow to more affluent Kentuckians — “people who need them the least” while lower earners will save only enough money to pay for an oil change or cable bill.?

Beshear had previously said he intended to sign House Bill 1, the legislation cutting the income tax rate.?

Not total déjà vu, but Kentuckians can expect another income tax cut

HB 1, sponsored by Rep. Jason Petrie, R-Elkton, lowers the individual income tax rate from 4% to 3.5% effective Jan. 1, 2026. According to a fiscal note, the change will decrease state revenues by an estimated $718 million annually. The Republican-controlled legislature in 2022 reduced the rate by a half percentage point from 5% and by the same amount again in 2023.

The legislation, a top priority for the GOP-controlled state legislature, gained some bipartisan support from the minority of Democrats as it passed through both chambers, echoing Beshear’s support of the bill. Other Democrats opposed to the legislation argued the reduction of revenue would hamper the state’s ability to provide government services in the future.?

Republicans have touted the bill as part of an eventual move to eliminate the state’s income tax completely, aligning Kentucky with nine states that have no income tax, including Tennessee.?

Inflation across the economy has slowed going into 2025, but the threat of tariffs levied by the Trump administration against Mexico, Canada and China have raised concerns over rising prices amid potential trade wars. Threatened tariffs against Mexico and Canada have been put on hold after both Canada and Mexico pledged to boost border security. An additional 10% tariff on a wide range of Chinese goods has gone into effect, expected to raise prices on goods including toys and electronics.

The Kentucky Center for Economic Policy, a progressive think tank based in Berea, has opposed the reductions in the individual income tax, traditionally the state’s largest source of revenue, saying the cuts will deprive Kentucky of money needed to fund education and other services.

“Approximately two-thirds of income tax cuts in Kentucky flow to the wealthiest 20% of people,” says the center’s analysis. “The richest 1% of Kentuckians will receive an average of $5,528 a year from a half point reduction in the income tax, while working class Kentuckians may receive enough for one oil change or a cable bill a year. … Meanwhile, they will be disproportionately harmed by poorer schools, reduced access to health care, outdated infrastructure, higher fees of various kinds to address future shortfalls, and more.”