FRANKFORT, Ky. — A bill that could give some Kentuckians a $1,000 tax refund was withdrawn from the Senate in a vote close to the party line Monday.

Individuals who paid personal income taxes in calendar year 2020 would receive a tax refund of up to $500 and households would be eligible for up to $1,000 under the proposed tax refund. Senate Bill 194.

Sen. Chris McDaniel, R-Taylor Mill, who is sponsoring the bill, said the refund will bring relief to Kentuckians and help drive up inflation.

“The biggest problem facing Kentuckians right now is inflation and we are optimistic that this is something that will help them deal with this problem, using the dollars they had already sent to the government” , McDaniel said.

If passed, McDaniel said people could start seeing payments as early as this spring and said those who qualify won’t need to apply for the program.

The reimbursement scheme would cost the Commonwealth $1.15 billion.

The state is sitting on a large cash reserve right now, which is how McDaniel said he was able to fund it.

During Monday’s Senate debate, several Democrats raised concerns about voting on the bill before a state budget is passed.

“We’re voting on a $1.15 billion project in the budget, but we haven’t voted on the budget yet,” McGarvey said.

If you did not pay personal income tax in 2020 or were claimed as a dependant, you will not get this refund.

This includes some people who apply for retirement benefits.

“A married couple can receive $62,200 a year plus each of their Social Security benefits, which, depending on income brackets and others, can reach up to $120,000 a year in retirement income, and withdraw it entirely in tax-free,” McDaniel said. “If you took that much tax free, then yes, you wouldn’t qualify because you wouldn’t be a taxpayer.”

McGarvey said while he supports using excess state surplus revenue to help people, he doesn’t think this bill is the right way to do it.

“This bill only gives a refund to people who paid a certain amount of income tax last year,” McGarvey said. “It wipes out a lot of older people who are on fixed incomes or are retired.”

While the Senate tax refund bill looks back to provide relief to Kentuckians, a bill making its way through the House (House Bill 8) looks forward.

If passed, state income tax would be lowered from 5% to 4% from January 2023.

Then – every year after that, as long as the state generates enough revenue, Kentucky’s income tax would drop half a percentage point until it hits zero.

In years when the state does not generate enough revenue, the income tax rate will be maintained at the current rate in that year.

SB194 now heads to the Chamber for consideration.

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