Kentucky Chamber of Commerce President and CEO Ashli Watts, left, questions House Speaker David Osborne, center, and Senate President Robert Stivers during a panel discussion Monday. (Kentucky Lantern photo by McKenna Horsley)
LEXINGTON — Republicans will quickly move to keep lowering Kentucky’s income tax when the legislature convenes in January, while changes in the local tax system would be far more challenging to achieve, legislative leaders said Monday.
Republicans House Speaker David Osborne of Prospect and Senate President Robert Stivers of Manchester — the top-ranking lawmakers — spoke at the Kentucky Chamber of Commerce’s Legislative Preview Conference.
Kentucky Chamber President and CEO Ashli Watts asked about prospects for tax reform at the local level, which the GOP leaders said would be a tall order because it would require amending Kentucky’s Constitution.
“Until we get cities and counties and other types of governmental entities involved, it’ll be really difficult to change the Constitution,” said Stivers. “You’ve seen how hard it was to change the Constitution the last three or four times we’ve proposed amendments.”
Osborne said it would “take a significant investment to educate people in advance” of a vote on such a constitutional amendment before the legislature could pursue local tax reforms.
The Kentucky League of Cities is seeking an amendment to Section 181 of the Constitution that would allow the legislature to “modernize” cities’ revenue options.
The Kentucky Chamber of Commerce also supports giving local governments more flexibility to generate revenue, with a focus on on “economic competitiveness,” but says if local governments are allowed to begin imposing a sales tax it should be offset by reductions in local occupational taxes.
The Chamber also has been a vocal proponent of continuing to lower the state’s income tax. In regards to that, Osborne said he expects the House to act quickly during the first week of the 2025 session in January on a bill to continue lowering Kentucky’s income tax.
The Republican-controlled General Assembly set up the pathway to eliminate the state income tax with 2022 legislation. That began annual half-percent cuts if certain metrics in state finances are achieved. Those thresholds were met for a reduction next year — the third since 2022 — to a rate of 3.5%.
The Legislative Preview Conference featured elected officials and policy experts speaking on various topics and issues in front of Kentucky business leaders in Lexington. Stivers and Osborne also discussed other issues likely to come up next session, including housing, education and artificial intelligence.
During the interim session, a legislative task force studied Kentucky’s housing shortage and released its final report last week. Both Stivers and Osborne pointed to public-private partnerships as a possible solution and cited such a partnership in Lexington to create an affordable housing project on the former site of Transylvania University’s baseball field.
As for education, Stivers said lawmakers want to find ways to better support failing schools but are limited by the Constitution on how to do that. Earlier this month, 65% of Kentucky voters defeated Amendment 2, a proposed constitutional amendment backed by Republicans that would have allowed the General Assembly to fund nonpublic schools.
“We will have to skirt around the edges and figure out how we can deliver products to failing schools or have accountability measures for those failing schools that give our children the best opportunities to succeed,” Stivers said.
Osborne predicted the legislature is a “long way” from enacting legislation governing artificial intelligence. Legislators on the AI task force during the interim session released their policy recommendations last week. Osborne said the group showed how much is unknown in that area and that small steps, such as creating definitions, may be taken this session.
During the general election earlier this month, Republicans and Democrats maintained their caucus numbers with the GOP holding their supermajorities in both the House and Senate. Republicans have 80 seats in the House and 31 in the Senate. The caucus numbers mean Republicans will have an easy time enacting their policy priorities and overriding any vetoes issued by Democratic Gov. Andy Beshear.
Lawmakers and policy experts spoke on a variety of panels at the daylong conference. In one of the panels, four new members of the General Assembly spoke about why they decided to seek office and how they are preparing to serve in the legislature. During the panel, J.T. Payne, the Republican representative-elect in the 11th House District, said lawmakers should look at “how we support educators and let them do their jobs” in response to an audience question about future education policy. Payne is the assistant principal of career and technical education at Henderson County High School.
Payne urged cutting red tape and the abundance of standardized tests to allow more focus on teaching students relevant curriculum and life skills.
“As a legislature, we have to restore trust of public educators, and restore their trust in us as legislators and their legislature as a whole,” Payne said. “And I look forward to contributing to that.”
Anne Gay Donworth, the Democratic representative-elect in the 76th House District in Fayette County, added that with the defeat of Amendment 2, lawmakers now have “a real opportunity” to focus on addressing issues like child care needs and increasing student success.
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