House Bill 1 Summary

• Income Tax Reduction: Gradually reduces the individual income tax rate on taxable income exceeding $10,000 from 4.4% (2025) to 3% (2030 and thereafter), with potential additional reductions after 2031 if budget conditions allow.

• Grocery Sales Tax: Imposes a 5% sales tax on retail groceries effective July 1, 2025 (previously exempt or taxed differently).

• Fuel Excise Tax Increases: Increases excise taxes on gasoline and special fuels in stages (21¢ July 2025, 24¢ July 2026, 27¢ July 2027) with automatic indexing adjustments beginning July 1, 2029.

• Municipal Infrastructure Funding: Allocates increased use tax revenue to municipalities and counties for road, bridge, water, sewer, and building acquisition/rehabilitation projects through special funds.

• Public Employees' Retirement System Reform: Creates a new hybrid tier for state employees hired on or after March 1, 2026, featuring a defined benefit plan (1% per year of service) combined with a defined contribution plan, with stricter eligibility requirements and elimination of annual cost-of-living adjustments.