Louisville Metro Councilman Ken Fleming, R-7, is concerned that Mayor Greg Fischer’s push for a local option sales tax will burden residents and wants to examine cutting other levies first.
For several months the mayor has been lobbying that the city needs the tool to be more competitive and independent.
Fischer argues his administration is not seeking a tax increase, and only wants voters to have the power to decide whether or not to fund special projects through a temporary hike to the state’s sales tax.
But Fleming says the mayor has provided few details on what a specific proposal would look like, and is ignoring his campaign promises to spur economic development and job creation.
“Their goal should be economic development, and adding an additional tax on individuals regardless of income is not the right way to go,” he says. “What we need to focus on is to try to find those strategies and tactics like getting rid of the occupational tax. That will help development incur job creation. I think we ought to look at that process and not a tax mentality.”
The occupational tax is one of the main revenue streams for Metro Government along with the insurance premium and property tax. A Fischer spokesman says cutting other levies, however, would only add to the city’s deficit and strained financial imbalance.
“The occupational tax, that’s how we fund the city services,” mayoral spokesman Chris Poynter told WFPL in a telephone interview. “It would create a bigger problem.”
According to the Fischer administration, the option could bring in $90 million annually with a one-percent increase that residents could accept or reject based on the ballot initiative.
A bill to create the local option was introduced by state Sen. Kathy Stein, D-Lexington, earlier this month. It does not specify much about the sales tax hike other such as how much revenue the city would retain from the increase.
Fleming also cites a study by the chief financial officer of Washington, D.C., which ranks Louisville as the fifth most tax burdened city in the county ahead of Los Angeles, Chicago and New York City.
As The Courier-Journal’s Chris Otts reported last December, the study has been cited by economists such as former University of Louisville profess Paul Coomes, who was a trusted financial adviser for council members since merger.
It shows that across all income levels, Louisville has a high tax ranking. But some public policy analysts argue that the D.C. study shouldn’t be applied to the local option debate.
“That study is quite well done and without any bias I can determine, but it is not useful for decision-making in Louisville because many of the assumptions that underlie the analysis are not applicable to Louisville Metro,” says UofL professor Janet Kelly, who is executive director of the Urban Studies Institute. “In order to make an apples to apples comparison, we’d have to include the county taxes and exemptions of the other jurisdictions in their calculations of tax burden as well.”
Kelly says the city needs to invest in infrastructure projects, and a local option sales tax are generally more acceptable to the public than other means of raising revenue.
“If Councilman Fleming was informed by the findings of this report then certainly that study does sustain those conclusions, but what I’m saying is this report is not suitable to inform policymakers who are looking at different tax alternatives for Louisville,” she says.
The mayor’s office and council Republicans are also at odds over what to call the initiative.
Fischer has dubbed the initiative Local Investments For Transformation, or LIFT while the GOP insists on calling the proposal LOST, which stands for Local Option Sales Tax.
“The mayor is using LIFT as a PR spinster of a term to get it sort of warm and fuzzy. We need to call it what it is and not gloss over it, and if he’s trying to play a PR game and all that stuff I think people see through that,” says Fleming.
If approved by state lawmakers, the local option sales tax will be on the November 2014 ballot statewide for voters to amend the Kentucky Constitution.