Looking to throttle skyrocketing inflation and ensuing rising prices, Governor Andy Beshear announced Wednesday the signing of an executive order that will stop the increase of vehicle property taxes.
The increase is caused by ballooning used-car values. The Governor also unveiled a proposal for a one-year 1% drop in the state’s sales tax from 6% to 5%. The combined efforts, should the proposal pass both the House and the Senate, would bring more than $1.2 billion in tax relief to Kentuckians over the next fiscal year — including more than $850 million in sales tax savings, and more than $300 million in vehicle property taxes.
Over the last two fiscal years, used-car values have increased nearly 40% for most makes and models in Kentucky — in what is a direct correlation of pandemic-stricken assembly lines, supply chain struggles and an increased demand for vehicles.
Beshear noted the property valuation for the average motor vehicle in Kentucky rose from $8,006 to $11,162 during the 2021 fiscal year alone, and that this sharp rate of change had to be corrected.
House Bill 6, targeting this tax, had already been underwritten and co-sponsored by numerous legislators across the state. However, Beshear said he was notified that he had the authority to issue an executive order regarding this concern — so he issued it.
Meanwhile, in an effort with legislation sponsor and Kentucky House Democratic Caucus Whip Angie Hatton (D-Whitesburg), there is strong belief that cutting state sales tax from 6% to 5% from July 1, 2022 to June 30, 2023 would greatly impact everyone in the Commonwealth.
With the US inflation rate sitting at a 40-year-high of 7.5% on retail, restaurant and non-food or medicine purchases, a sales tax decrease of 1% would reduce tax costs for all families by more than 15% — as groceries, building and hardware materials and clothing purchases would all receive tax deductions.
Inflation rates are expected to tumble in the 2023 fiscal year and beyond, but Beshear said families are struggling now.
Hatton agreed.
Beshear’s proposed tax slash, accompanied with a freeze of the motor tax rate, come when the state is experiencing a record surplus budget and a record-setting year of more than $11 billion in planned investments and economic expansion announcements across the Commonwealth.
He calls this a short-term solution for a short-term solution.
Only five states in the country have 0% sales tax: New Hampshire, Montana, Alaska, Delaware and Oregon.
