Kentucky General Fund revenues increase even as income tax rate drops

(The Center Square) – Kentucky’s General Fund receipts continued to grow in January.

According to the Office of State Budget Director John Hicks, the state collected $1.29 billion for the General Fund last month, an increase of more than $75 million compared to January 2022.

That increase happened even as the state saw the personal income tax rate drop from 5% to 4.5%. Kentucky collected $312.2 million in personal income tax last month, compared to $308.4 million the year before.

“Withholding receipts still grew 1.2% in January even though the withholding tax tables dropped by 10%,” Hicks said in a statement. “Strong growth in Kentucky wages, coupled with employment growth, have positioned Kentucky’s revenue collections to grow even with the rate reduction.”

But it wasn’t just income tax receipts that saw growth. Hicks’ office also reported an all-time high in sales and use taxes. The $553.2 million marked just the second time the state has collected a half-billion dollars in sales taxes in a month. The previous high came in January 2022, when Kentucky received $516.5 million.

Business tax revenue also grew as the $49.9 million collected in January was 19.2% higher than the $41.8 million from January last year.

Kentucky’s General Fund revenues have totaled $8.73 billion for the first seven months of the 2022-23 fiscal year. That’s about $48 million, or 5.8%, ahead of what the state collected during the first seven months of the 2021-22 fiscal year.

The state’s road fund also grew in January, with the $144.1 million collected 8.8% higher than the $132.5 million received in January 2022.

That increase was despite a nearly 6% drop in motor fuel taxes ($60.7 million from $64.5 million). However, that was more than offset by a 21.3% increase in motor vehicle usage taxes ($57.2 million from $47.1 million).

After struggling at the beginning of the fiscal year, the road fund has increased by 4.1% through the first seven months.

With $986.6 million in the fund, revenues need only to increase by .9% over the last five months for the road fund to meet official projections for the fiscal year.