While members of legislative leadership tempered expectations heading into the 2023 legislative session, the Kentucky General Assembly delivered in a big way for the business community, continuing efforts to make Kentucky more competitive and address workforce challenges.
Further reducing Kentucky’s personal income tax rate, expanding our commitment to workforce investment, and utilizing a key tax deduction for small businesses marked a few of the many wins for the Kentucky Chamber of Commerce in 2023.
In dramatic fashion, lawmakers also gave final passage to two key bills supported by Kentucky’s signature bourbon and equine industries, phasing out an unfair tax on aging bourbon barrels and legalizing sports betting in the Commonwealth both online and in-person at Kentucky racetracks. This furthered the legislature’s commitment to protecting our signature industries after a bill banning “gray machines” was passed earlier in the session.
The top priority for the Kentucky Chamber was House Bill 1, which will reduce Kentucky’s income tax from 4.5% in 2023 to 4% starting in 2024.
This bill saw final passage in the first two weeks of the session, and was signed into law by the governor shortly thereafter.
House Bill 1 was the result of a tax reform package and framework approved by the General Assembly during the 2022 legislative session, another top priority of the Kentucky Chamber.
While other states continue to identify ways to drive down income tax in a shift toward a more consumption-based tax structure, House Bill 1 will ensure Kentucky continues to compete for jobs and investment in the future.
Piggy-backing on the success of the 2022 session, several other bills were passed to further enhance efforts on key issues in the areas of unemployment insurance reform, benefit cliffs and the Kentucky Employee Child Care Assistance Partnership.
We were also beyond pleased to see a couple of measures that had not seen success in prior years, one to expand the Kentucky Educational Excellence Scholarship to apply to proprietary schools and the other, House Bill 551, to legalize sports betting, be signed into law by Gov. Andy Beshear in 2023.
In addition to eliminating a regressive tax on aging bourbon barrels, House Bill 5 contained language to create parity between corporations and pass-through businesses when it comes to utilizing the federal, state and local tax deduction, which will save small businesses in Kentucky an estimated $40 million annually with no additional cost to the state.
With House Bill 5’s passage, Kentucky joined 30 other states that have acted to pass parity relief legislation.
While the Chamber was successful in supporting a wide variety of bills throughout the 2023 session, it also successfully opposed and defeated other measures that would significantly raise the cost of doing business in Kentucky.
One was Senate Bill 15, which sought to create data privacy standards similar to those enacted in Europe and California, which would cost Kentucky businesses hundreds of millions in compliance fees, litigation costs and lost marketing opportunities.
The Chamber also successfully advocated against a proposal that would have threatened an important manufacturing sales tax exemption that we previously fought to protect in the courts, as well as many others that would have eroded employer rights.
As we reflect on the 2023 session, lawmakers prioritized making Kentucky a more competitive place for businesses and took action to further address our workforce crisis. While I never would have imagined we would come close to topping our success from the 2022 Kentucky General Assembly, I think 2023 gave it a serious challenge, again making great strides for the job creators of the Commonwealth.
The Kentucky Chamber applauds the legislature on another great session and looks forward to working together to continue moving the needle to reach our full economic potential in Kentucky.
Ashli Watts is president and CEO of the Kentucky Chamber of Commerce.