The changes are designed to modernize the tax structure as Kentucky continues to change from a goods-based economy to a service-based economy.
The income tax rates will be simplified by adjusting and reducing the number of rate brackets.
The highest income tax bracket’s rate will go from 6% to 5.8%.
Gov. Beshear said, "No Kentucky tax payer will suffer a detriment from the adjustment in these rates and that every tax payer will benefit from the reduction of these rates."
One of the biggest changes in the plan would expand the state sales tax to most services, such as labor at auto shops.
Smokers will pay more. The current cigarette tax of 60 cents will go to $1 a pack and the cigarette rolling paper tax would be restored if the plan is passed.
Of Kentucky’s neighboring states, only Ohio would tax cigarettes higher, where smokers pay $1.25 per pack. The national average is $1.46 per pack.
Kentucky would also become the second state in the country to tax e-cigarettes.
Beshear acknowledges the battle to pass the plan will be difficult since many state lawmakers are facing reelection this year.
If the plan is not passed in this year’s legislative session, Beshear says he will keep trying to modernize the state’s tax code."