“Cities Need Local Option” – Lexington Herald-Leader

Growing the economy is the optimum way to raise revenue for the state, but Kentucky’s antiquated constitution applies the brakes to powerful economic engines.

We’re talking about Kentucky’s cities, which are hives of economic activity but are at a competitive disadvantage because of their limited taxing options.

Kudos to the Governor’s Blue Ribbon Commission on Tax Reform for endorsing more taxing authority for local governments.

The recommendation would require voter approval twice — statewide first on a constitutional amendment and later on a local option tax question.

Under the recommendation, local governments could enact, with voter approval, temporary sales tax increases to finance infrastructure and projects. The tax would sunset when the project was paid off.

Local officials would have to make a strong economic case to convince voters to raise taxes on themselves.

In Lexington, for example, Mayor Jim Gray would have to show that his vision for a reborn Rupp Arena district would generate good jobs, not just good architecture.

On the downside, the sales tax falls heaviest on lower-income people, the working poor, as Rep. Jim Wayne reminded the tax reform commission.

The commission’s recommended increase in tobacco taxes also would weigh heaviest on lower-income Kentuckians.

We support higher tobacco taxes for public health and new local taxing options. But the ultimate test of any tax system is fairness. To balance higher taxes that would hit lower-income Kentuckians, the commission and legislature must also support creation of a generous state earned income tax credit.

President Ronald Reagan called the federal earned income tax credit “the best antipoverty, the best pro-family, the best job creation measure to come out of Congress.”

Twenty-five states and the District of Columbia have supplemental EITCs. Kentucky should become the 26th.

The idea behind the EITC is that a family shouldn’t be poor if a parent is working full-time. The credit enables eligible workers to reclaim all of the federal income tax that was withheld from their paychecks, plus a refund up to the amount of the credit if the credit is more than the tax liability.

The credit is available to families who have children and annual incomes below $36,900 to $50,300, depending on marital status and the number of dependent children.

About 400,000 Kentucky families receive the federal credit. States set their EITCs as a percentage of the federal credit ranging from 5 percent to 32 percent.

Setting Kentucky’s credit at 15 percent of the federal credit would cost the state about $135 million, but that’s money that would be returned directly to local economies as few low-income families would be able to sock it away in the stock market.

The tax reform commission has recommended a bevy of breaks to make Kentucky more business friendly. The state’s low-wage workers deserve a break, too.

Source: Kentucky.com

What People Are Saying

  • “Putting the local-tax amendment on the November 2014 statewide ballot is a no-brainer. If local people want to levy local taxes on themselves, they should be able to.”

    Al Cross, Courier-Journal columnist
  • Jeff-Bringardner-headshot-only“This is a way to keep dollars in the area, to come up with a diverse slate of projects that sync up with the long-term plans of the community and get voted on by the people”

    Jeff Bringardner, President, Humana Kentucky
  • BillLamb“If Louisville could adopt a 1% Local Option Tax, it would impose a minimal burden, but would raise over 90 million dollars a year.”

    Bill Lamb, President and General Manager for WDRB and WNYO
  • Bill Samuels Bellarmine Portrait“Local option makes all the sense in the world. Offering citizens the opportunity to vote on investing in their community is how our country ought to operate.”

    Bill Samuels, Chairman, Emeritus Makers Mark
  • …a new way for communities to see the projects they want and need go from the drawing board to reality — and to do it for themselves.

    Jim Host, founder of Host Communications and former State Commerce Secretary
  • LIFT is a tried-and-true tool that allows for more voter involvement in the process.  Voters, not politicians, would help determine big picture, visionary projects that could improve quality of life.

    Dave Adkisson, President and CEO of the Kentucky Chamber of Commerce
  • …an idea whose time has come, and could be a crucial economic development tool which will help our local communities build a better future, and the new jobs and businesses we need.

    Hal Goode, President and CEO of the Kentucky Association of Economic Development
  • In our opinion, Kentucky voters should be allowed to vote on the local option sales tax because it could fund public facilities without increasing property taxes.

    Morehead News
  • It will allow communities to plan and pay for improvements to enhance civic and economic life without going hat in hand each budget session to Frankfort.

    Lexington Herald-Leader
  • The beauty of it is that local voters have the say-so as to its enactment, and they have a sense that they are getting what they pay for.

    Princeton Times-Leader