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Tue September 10, 2013
Ken Fleming: Local Option Sales Tax is an Option, but Louisville Must Address Taxes, Revenue
Louisville Metro Councilman Ken Fleming sees nuance with the potential adoption of a local option sales tax in Kentucky and in the city. But he doesn't see nuance if nothing is done.
“We’ll keep flipping around like a fish on a dock," Fleming said on Tuesday.
The East Louisville Republican was introducing on Tuesday a study he'd commissioned on the effects of a local option sales tax, which generally allows local governments to issue a sales tax to fund projects.
Here's WFPL's Philip Bailey's story on the study. You can read the study there, too.
The local option sales tax is a key issue for Mayor Greg Fischer, but Fleming said the study shows that Louisvillians have plenty of tax burdens already. He'd support a form of local option sales tax if it were offset by cuts to other taxes, such as the insurance premium tax or property taxes.
But with no action on how the city generates revenue, Louisville would struggle to compete with the cities it considers peers, Fleming said.
“They’ve made some changes," he said of those cities. "They’ve taken a serious look at how they need to change the dynamics. And if we don’t do anything, then we’re going to continue to be flat and not be where we should be.”
The study was done by Janet Kelly, executive director of the University of Louisville's Urban Studies Institute. It doesn't take a position on whether the local option sales tax should be implemented in Louisville, but Kelly did say that infrastructure plays a role in Louisville's economic development.
"As we compete for knowledge workers—the so-called ‘creative class,’ people who add value to our economy—we’re going to have to compete with amenities, and we’re going to have to compete with a very, very solid infrastructure," Kelly said.
“Whether or not existing resources are sufficient provide those is a policy question. But I do think we are going to have to invest in our infrastructure—our knowledge infrastructure, our amenities infrastructure—if we want to be the kind of first class city that we’d all like to see Louisville become.”
As Phillip reported, Fischer said the study provided valuable information.
In his statement, Fischer said: "As the study points out, 13 of our 14 peer cities have local option and we are at a competitive advantage because of it. The study also shows the need for statewide tax reform to bring our economy into the globally-competitive 21st Century.”
Kelly also said the state's efforts to reform its tax system may not bode well for cities.
Judging from state-level discussions on tax reform, Kelly said cities may be expected to bear more of the cities for providing services—a move she called "shortsighted."
"If that is true, then it makes sense for the local governments to have as much flexibility in the revenue sources as possible," she said.
Regardless, the push for the Kentucky General Assembly to allow for a local option sales tax will face challenges, Fleming said, noting that he's discussed the matter with Louisville's legislative delegation.
Meanwhile, even with a local option sales tax, Kentucky legislators could hypothetically use Louisville's ability to approve its own revenue to decrease state funding to the city, Fleming conceded. Louisville gets back from the state much less than it sends.
Fleming argues that Louisville is Kentucky's "economic engine," and giving the city more flexibility in how it raises money would lead to more revenue for the state.
How a state law allowing local option sales tax is crafted may help to answer lingering questions, he said.
The public may be an easier sell than legislators, Kelly noted.
“From strictly a public finance standpoint, it’s not usual for the public to have divided opinions," Kelly said. "People want lower taxes but more services, so it is possible for us to be very highly taxed and for the sales tax to be a very popular alternative.
“Citizens have complex feelings toward taxation and I don’t see those two ideas as necessarily being in contention with each other.”