KACo testifies in support of HB475 to give local governments more revenue flexibility

Rep. Michael Meredith (R-Edmonson, Warren) sponsored the bill, which was discussed at length earlier today in front of the House Elections, Constitutional Amendments and Intergovernmental Affairs Committee.

Meredith said that over the past year, he has worked with KACo, the Kentucky League of Cities and others to discuss local tax reform. That group found that local governments are highly dependent on local income taxes – like the occupational tax – but options for finding alternative revenue sources at the local level are limited by the Kentucky Constitution.

“We all know that our cities and counties have essential services that they must provide and section 181 of the constitution had always been overly restrictive with regard to the types of taxes that cities and counties have the ability to levy,” Meredith said.

“The limited types of taxes that local governments could look at for funding their essential services have always been those productivity based taxes – those local income taxes – as well as property taxes.”

Meredith said he knew that to have a serious conversation about changing the tax code, he had to find a way to allow additional forms of flexibility in revenue and revenue collection at the local level. That’s where HB475 comes in.

“It seeks to amend section 181 of the constitution to specifically take out the old restrictions on the types of taxes so that the General Assembly would have the opportunity to come back and create a framework that provides flexibility to our local governments to do what’s best inside their jurisdictions,” Meredith said.

KACo Executive Director Jim Henderson Testifies

KACo Executive Director Jim Henderson testified during the Committee alongside Meredith and city colleagues in support of HB475.

“We’ve been talking about local tax reform for as long as I can remember,” said Henderson, who has worked in and for county governments for 22 years, first as the long-time Judge/Executive of Simpson County and now as the Executive Director of KACo.

“Every time we would talk about it, we would get to these points where we are talking about things we can’t do,” Henderson added.  “We just can’t do them because of the restraints in the constitution.”

He explained that the last year of conversations with Meredith and others has ultimately led to the same conclusion.

“Until there are changes to the constitution, we are simply spinning our wheels talking about the kinds of things that we might do at the county or city level with tax reform or local taxation changes,” Henderson said

Henderson reiterated that there is “no one size fits all” when it comes to the mix of revenues needed at the local level, and that this is the first step that must be taken to start the local tax reform conversation.

“Make no mistake, counties are struggling for revenues,” Henderson said. “As you know, we come and we plead to the legislature so often. This would be a first step in just simply giving us more opportunity at the county level, the city level, to not have to ask but to make those decisions ourselves.”

Henderson urged the General Assembly to trust locally elected officials to know what is best for their communities.

“The people who elect county officials and city officials to the make those decisions are the same people who elect the legislature to make those kinds of decisions,” Henderson said. “So we have to trust those decisions at the local level.”

Henderson said that when he was Simpson County Judge/Executive, his county was at a clear competitive disadvantage with Tennessee.

“Time and time again, we would lose out to our neighbors to the South because of tax policy,” he said. 

Tennessee does not have a local or state income tax.

Committee Chair Rep. Kevin Bratcher recalled a tour he took with Henderson at the Kentucky-Tennessee border.

“Nowhere is it more pronounced – the economic developments of Kentucky and Tennessee – as on that border there,” Bratcher said. “It’s obvious that Tennessee is eating our lunch.”

KACo urges county officials to contact their representative in the House, and ask them to support HB475.

Learn more about the legislation HERE.