Governor Steve Beshear unveiled a proposal to modernization some of the commonwealth’s tax practices that would raise revenue for Kentucky’s General Fund of approximately $210 million annually after full implementation.

Beshear presented the proposal, Kentucky Competes, to legislative leadership and the Appropriations and Revenue Committee of the House of Representatives. He awaits a consensus before introducing any legislation. The proposal includes the following:

  • Slight reduction in corporation income tax rates from 6 percent to 5.9 percent
  • Phase-in over a three-year period of single factor apportionment based solely on sales for corporation income tax
  • Change of the existing cost-of-performance based formula for apportioning “sales” of services to destination sourcing
  • Create an angel investor tax credit for certain investments in small businesses
  • Expand the state's research and development tax credit to human capital
  • Exempt inventory from state property tax (merchant's inventory, manufactured finished goods and goods stored in warehouse)
  • Eliminate selected negligible state property taxes for tangible personal property
  • Create an income tax credit for the bourbon industry the proceeds of which must be reinvested in facilities and equipment
  • The amount charged for labor or services rendered in installing or applying the tangible personal property, digital property, or service sold
  • Exempt from sales and use tax certain equine products
  • Exempt from sales tax pharmaceuticals for food animals
  • Lower the wholesale tax on beer, wine and distilled spirits
  • Repeal the distilled spirits case sales tax
  • Increase the tax rate on cigarettes to $1 and increase the tax rate on other tobacco products commensurate to the cigarette tax increase and tax e-cigarettes at 20 percent of value
  • Broaden the sales tax to include selected services such as landscaping and janitorial services, warranty service contracts, industrial launderers and linen supply, security system services, pet care services, tanning salons, fitness and recreational centers, golf courses, country clubs, marina slip and storage rentals, and overnight trailer campgrounds
  • Apply sales tax and transient room taxes to online travel companies