But critics of the latest proposal fear it will curb economic growth and lead to job losses.
Some protesters who marched through the capital called for the president to resign, chanting “Ruto must go! Ruto must go!”
The U-turn on the new finance bill was announced by National Assembly Finance Chairman Kuria Kimani at a media briefing attended by President Ruto and ruling party lawmakers.
His finance team has been gathering public input on the bill, and he said he has decided to withdraw some of the proposals to protect Kenyans from rising costs of living.
Other tax proposals being repealed include taxes on cooking oil, mobile money services and automobiles, which critics said would also hit the insurance industry.
Prime Minister Kimani also announced the withdrawal of a proposed environmental tax targeting products deemed to have a negative impact on the environment, including packaging, plastics and tires.
It faced a lot of backlash due to many claims that the prices of major items such as diapers, sanitary napkins, computers, and mobile phones would increase.
The levy will now only apply to imported goods, Mr Kimani said.
Mr Ruto did not speak or react during the briefing, but the move, which appears to be a bow to public pressure, will be a blow to his government.
He recently called for Kenyans to accept more taxes, claiming they were actually undertaxed, but acknowledged it would be difficult.
Over the past two years, taxes on payroll, fuel and gross sales have increased.
A housing levy of 1.5% of a worker's salary was also introduced to build affordable housing.
A new health insurance levy will also be implemented soon.
Protests are taking place in the capital as lawmakers are scheduled to debate the finance bill on Wednesday.
Police arrested several people for organizing protests.
Human rights groups criticized the police response.
“I am very angry and I am fighting for my future,” one protester named Wangari told AFP on Tuesday.
“I'm still a young adult and I want to grow up in this country. I don't know how I can make a living with all that taxation and exploitation.”
