By Ronnie Ellis / CNHI News Services
Source: The Richmond Register
FRANKFORT — Supporters say the issue is not about taxes but about choice.
The issue is a measure — which if voters approve a constitutional amendment — would allow local voters to approve a temporary additional sales tax of up to 1 percent to pay for specified local projects.
“This is not about a tax,” Rep. Tommy Thompson, D-Owensboro, told the House Elections, Constitutional Amendments and Intergovernmental Affairs Committee. “It’s about giving people a choice.”
House Bill 1, sponsored by Speaker Greg Stumbo, D-Prestonsburg, would place a constitutional amendment on a statewide ballot allowing local governments to levy up to a penny of local option sales tax for specific projects with local voter approval. The tax would be eliminated when the project is paid off.
Stumbo likes to quote Senate President Robert Stivers, R-Manchester, who calls the idea “democracy in its purest form.”
The measure is supported by more than 40 organizations, including the Kentucky League of Cities, the Kentucky Association of Counties, chambers of commerce, and the mayors of Louisville and Lexington.
Louisville Mayor Greg Fischer told the committee the measure would fund projects “that people can see and can vote on so they’ll feel like their money is put to good use.” Fischer said 37 other states allow such a local option sales tax.
He said public polls indicate 60 percent of respondents favor the measure, although Rep. Mike Harmon, R-Danville, said the poll actually suggested people could vote to lower taxes as well as raise them.
Rep. Jim Wayne, D-Louisville, claims the tax is too regressive, that its effects will fall disproportionately on the lower income groups while Todd Griffin, president of the Kentucky Retail Association, said it will hurt small businesses, especially those along borders of states with lower sales taxes.
Wayne concedes the need for more revenue to fund infrastructure projects at the local level, but he suggested a fairer way to do that would be to allow local governments to assess fees and taxes on property transfers or income rather than through the sales tax. Those alternatives would shift more of the burden up the income scale.
Griffin said the tax is also unfair because many rural residents shop and spend money in more urban locations where the tax is most likely to be assessed – but wouldn’t have the opportunity to vote on whether to impose the tax. He said it will also increase the burden on businesses which must collect the tax and remit a portion to a local municipality while sending the rest to Frankfort.
But Stumbo said the idea is a simple one.
“It allows local people to choose whether they want to be taxed,” Stumbo said. “It allows them to make the decision and dedicate the funding sources to a particular project. When the bonds are satisfied then that particular tax goes away.”
Despite Wayne’s contention that the less affluent pay a much higher percentage of their disposable income in sales taxes, Stumbo said the exemptions for food, medicine and residential utilities lessens the regressive nature of the tax. And, he said, it’s a fair tax “because everybody pays it.”
Harmon suggested some of the bill’s language might be unclear about the specified “sunset” of such taxes and plans to file floor amendments to the bill.
The measure is co-sponsored by House Minority Leader Jeff Hoover, R-Jamestown. Stumbo said that’s an indication of support by at least some Republican House members, adding he probably needs eight to 10 Republican votes to pass the measure.
The bill now goes to the full House for a vote.