Kentucky’s economy is on fire, with record-breaking investments and job creation across the commonwealth, and we have the best budget outlook in 25 years. We see our destiny as leaders rapidly approaching, with more opportunities than ever before for our families and our children.
But as we work to fully realize our potential, Kentucky families and small businesses are faced with having to pay more for daily essentials, as well as goods and services.
While this challenge is temporary, inflation has reached a 40-year high – directly due to the effects of a once-in-100-years pandemic that has stretched on for nearly two years.
It is tougher for our families to get by, and it threatens our small businesses if people can’t afford to buy what they’re selling.
So recently, I announced immediate relief on vehicle property taxes and proposed a temporary 1% drop in our state sales tax.
Under my proposals, Kentuckians would see tax relief of approximately $1.2 billion – $873 million directly related to sales tax savings and $340 million from the reduction in vehicle property taxes.
First, I signed an executive order that will result in savings for Kentuckians by stopping an increase in vehicle property taxes, which in Kentucky have risen nearly 40% since last year, due to unprecedented soaring used car values.
In simple terms, under this order, Kentuckians will pay an amount similar to last year if they own the same vehicle in the same condition and are living in the same county, and they will not pay taxes on the inflated value.
Under Kentucky state law, only the Kentucky General Assembly can exempt all, or any portion of the property tax applied to motor vehicles. But for the first time, this month, in a joint resolution, the Kentucky Senate stated that I have the authority to make this change. So I took action, and the vehicle property tax is now halted at the 2021 level, and it is effective immediately and effective for two years!
Those who have already paid their 2022 tax don’t need to worry – they will be getting a refund.
Second, I announced that my administration is working with House Democratic Caucus Whip Representative Angie Hatton of Whitesburg, who filed legislation that would temporarily cut the state sales tax from 6% to 5% during the next fiscal year – from July 1, 2022, through June 30, 2023.
This historic sales tax cut will help families until the high U.S. annual inflation rate retreats, which experts predict will fall back to around the 2% range by the end of 2022 and through 2023.
This sales tax proposal decreases tax costs for Kentucky families by more than 16%, considering the U.S. inflation rate is currently 7.5%.
We are talking about savings on purchases at retailers and restaurants; on building and hardware materials; on clothing; as well as on purchases at grocery stores that are not food or medicine, because those items are already tax-free.
Our families need relief, and our proposal provides it. And, I have suggested adjustments to my budget recommendation that allows us to provide this relief while retaining a balanced budget.
So, if we are going to alter our tax structure, let’s do it to address current inflation and in a way that will help all of our families, regardless of their wealth. Let’s do it in a way that will make things cost less and help everyone’s dollar go further.
Right now, we can keep our economy moving, make historic investments in education, health care and the jobs of the future, all while we provide our families and small businesses relief.
We have the resources to do so. Last year, the commonwealth shattered every economic development record in the books. We also saw an all-time record-setting budget surplus in the fiscal year 2021 and entered 2022 with an estimated $1.9 billion more than budgeted – and the largest rainy day fund in our state’s history.
Our 2022 is off to a great start. In January alone, new and expanding private-sector businesses in Kentucky announced projects totaling nearly $670 million in new investments and more than 1,400 jobs.
The list of positive economic accomplishments goes on and on. Our future is hopeful. It is exciting. And it is time for lawmakers in Frankfort to help our families and small businesses by immediately passing sales tax relief.
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