Why Kentucky’s Zero Income Tax Plan Matters for You

04/27/2023

Kentucky legislators passed a law in 2022 that sets in motion an income tax reduction plan for Kentucky residents. Now as a possible out of state reader, you might be asking why this matters to you. We’re assuming if you’re here, the idea of expansion and growth isn’t out of the realm of possibilities for you. Maybe today that doesn’t mean Kentucky is on your radar, but we’re going to say it probably should be. Here’s why what Kentucky is doing should matter to you.  

In the past year, Kentucky has made the drop from a 5% income tax rate down to a 4.5% effective currently, with a January 1, 2024 drop to 4%.  That means residents will begin to see an increase in their take-home pay – saving tax payers an estimated $630 million.  That’s an important move for you as a business leader for several reasons. 

Kentucky and specifically South Western Kentucky are already an extremely affordable state and region to do business in. The average median income in South Western Kentucky is $53,499 while the median home still sells for under $200,000.  And, property taxes remain among the lowest 10% in the nation with no local sales tax on items.  

It’s easy to see that from a workforce and livability standpoint, earners in Kentucky keep more in their pocket from your investment. Paired with affordability of the area,  great community livability features including healthcare, recreation and entertainment, our region and Kentucky begins to be even more attractive not only from the investment side but increasingly for residents too.   It’s why we continue to boast our less taxing, more relaxing way of life!

Kentucky’s goal is to get to no state income tax as quickly as possible, putting Kentucky in an even more competitive spot to earn your investment. Kentucky now ranks in the top 20 in the United States for tax climate. 

You can learn all about investment incentives offered in South Western Kentucky, or by scheduling a consult call with Carter Hendricks. 

 Kentucky Votes “Yes” on Business-Friendly Policies 

In the most recent legislative session, Kentucky lawmakers voted to defeat measures that would discourage business growth in the commonwealth.  That’s important to you as you expand in Kentucky or determine Kentucky is the place for you to locate your business.  A few of those key measures led by the Kentucky Chamber of Commerce include: 

• Data Mandates. Costly mandates to employers would have been in effect with SB 15. Compliance costs ranging upwards toward $1.2 million were saved when legislators voted “no” to this bill. 
• Wage & Leave Mandates. Several bills mandating wage increases and paid leave were introduced and subsequently defeated saving employers in Kentucky an estimated $499 million in increases. Further work is needed to balance supportive measures these introduced, while not unfairly burdening employers. Kentucky legislators made these business-friendly choices in the 2023 legislative session. 
• Livability investments abound. Increasing the support for healthcare workforce was a key objective that passed when lawmakers implemented HB 200, creating the Kentucky Healthcare Workforce Investment Fund. The childcare assistance that comes with HB 165 will support updating the Employee Child Care Assistance Partnership aimed at increasing access to childcare for Kentucky’s workforce. 
• Educational attainment remains a key priority in Kentucky. Improving your workforce and talent pipelines is important. SB 54 moves to allow Kentucky Educational scholarship (KEES) recipients to use their funding at Kentucky’s top five high-demand workforce sectors. 

Kentucky leadership continues to put its money where its mouth is by supporting business friendly investments, incentives, policies, and tax structure.  Learn more about specific Kentucky business friendly policies as you consider your next business investment or move.