Support In State Senate For Short Term, Local Sales Taxes Sparse

Sep 25, 2013

During a legislative hearing, proponents, including the mayors of Kentucky’s two largest cities, argued cities should have the freedom to levy a local sales tax for special projects.  Plus, they want the question to go before Kentucky voters next year.   If approved, individual communities could then ask taxpayers to impose up to a one percent local sales tax.  It would be temporary and Louisville Mayor Greg Fisher says it would likely go for specific projects.

FRANKFORT— Interim Joint Committee on Local Government co-chair Rep. Steven Riggs, D-Louisville (right), confers with Senate Majority Floor Leader Damon Thayer, R-Georgetown, prior to the start of the committee's September meeting.
Credit Legislative Research Commission

“That doesn’t mean there can’t be different rates across the state for a local sales tax, but within each local jurisdiction there has to be a single rate,” said Fisher.

Even if approved, Lexington Mayor Jim Gray says such a levy would be too late to help with funding the reconstruction of Rupp Arena.  Jason Bailey with the Kentucky Center for Economic Policy says a sales tax can be especially hard on low income Kentuckians.  Plus, Bailey says few states dedicate such a sales tax to a specific project.

“If you look at 15 of the 23 states that have this that were surveyed in a U of L study, they actually use it for the general fund, rather than earmarking for a project.  That gives more flexibility to local governments,” said Bailey.

 If a project exceeds cost estimates, instead of increasing the tax, Mayor Fisher said the project can be scaled back.  He says some cities wait until all the needed funds are raised. Still, Senate Majority Floor Leader Damon Thayer raised serious concerns and predicts the legislature will not allow local governments to levy a sales tax.

“I have not once, in the ten and a half years I’ve been in the general assembly had a constituent come up to me and say they want to pay more taxes and that’s where I have a problem with this issue,” said Thayer.

Nevertheless, the issue is certain to resurface when the general assembly convenes again this winter.