A committee in the Kentucky General Assembly will discuss the idea of giving local voters an option to raise their sales tax to fund special projects.
State lawmakers tell WFPL they are keeping an open mind, but some cite a recent study showing Louisville is already a heavily tax-burdened city.
For the past year, Mayor Greg Fischer has been lobbying the General Assembly and others to support the idea.
The specifics haven’t been unveiled, but in general a local option would allow voters to approve a temporary 1-percent tax increase that would go towards specific efforts such as new infrastructure.
A report conducted by the University of Louisville found such as tool could generate up to $138 million in revenue for the city.
Democratic state Rep. Steve Riggs of Louisville is co-chair of the Interim Committee on Local Government, which is holding a hearing to discuss the proposal on Wednesday.
He says a temporary tax is an intriguing idea, but it is important legislators learn more about the proposal.
“I’m leaning for it because I see so many other communities around the nation that do it and I love letting the citizen decide and giving the citizen the liberty to determine where there money goes without sending it to Frankfort first and then it goes somewhere else. I love that part of it,” he says.
The study also showed Louisville is third most tax-burdened city among its peer competitors, and the introduction of a local option would bump the city up to the second most.
Among the chief findings in the 40-page U of L report is that Louisville has the highest income tax rate among its 14 peer cities. That has some lawmakers wary about the idea even though critics are eager to hear from supporters.
“In today’s world people need as much of their disposable income as they can get their hands on and to add another layer of tax is in my opinion not a prudent move,” says Republican state Sen. Joe Bowen of Owensboro, who is also a co-chair of the committee. “I know by local option people have a choice, but typically the folks who are selling the idea have an advantage, and when you take a local government promoting something like this they have a leg up.”
In order to have a local option, lawmakers would need to put a state constitutional amendment on the ballot next year for voter approval.
A temporary sales tax option is available in 37 other states, which Fischer argues puts Louisville at an economic and competitive disadvantage. Legislation on a local option was introduced in the Kentucky legislature earlier this year, but it did not receive a vote.
Riggs and Bowen also disagree on whether the local option needs to be part of the state’s larger tax reform efforts.
“It should be something separate because it’s not part of tax reform,” says Riggs. “It’s part of letting the citizens decide whether or not they want to pay an extra penny for local investment projects. It has nothing to do with the general idea of tax reform.
It is expected a bill to put a local option sales tax on the ballot next year will be introduced in the 2014 General Assembly, which is a session that could also tackle overhauling the state’s tax system.
“This was one of the components of the tax reform commission,” says Bowen. “I’m for the complete package. And I believe we should look at it in a comprehensive way.”
Fischer is among those who will address the local government committee, which is scheduled to meet Wednesday morning in Frankfort.