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Kentucky House Committee OKs Local Option Sales Tax

capitol
Kentucky state Capitol

A bill allowing Kentucky's local governments to increase the sales tax 1-percent to fund projects is heading to the full House.

The local option sales tax legislation won committee approval on Tuesday.

Under the proposed legislation, local voters would need to approve the temporary tax increase for each project.

Louisville Mayor Greg Fischer—an enthusiastic supporter of the local option—said the tax could fund the completion of the Louisville Loop, to build parks, and to increase wireless connectivity.

“People know we have many needs, but it’s up to the citizens to decide if those needs would be funded on a temporary basis,” said Fischer, who spoke Tuesday to the House committee in support of the measure.

But state Rep. Jim Wayne, a Democrat from Louisville,s said an increase to the sales tax would disproportionately hurt poor Kentuckians.

“It does not meet muster with the first criteria that we should use for all social policy, and that is: does it hurt in any way the most vulnerable? And ladies and gentlemen, this does hurt the most vulnerable,” Wayne said.

Wayne said increased prices for goods would take up a greater portion of the incomes of poor Kentuckians, and wealthy people wouldn’t notice an increase as much.

Todd Griffin, president of the Kentucky Retail Federation, said if the measure is passed, rural residents who shop in cities would end up paying taxes that they didn’t vote for.

“The reality is that many rural communities will not benefit from the revenues of the local option sales tax,” Griffin said.

The bill needs 60 votes to win House approval because it's a constitutional amendment.

House Speaker Greg Stumbo, a Democrat from Prestonsburg and chief sponsor of the bill, said he’s confident he’ll have the votes. House Minority Leader Jeff Hoover, a Republican from Jamestown, is a co-sponsor of the bill.

“If Representative Hoover is able to persuade just a few of his caucus members to join him it will pass the House,” Stumbo said.

But Hoover recently came at odds with House Democratic leadership over committee assignments for freshman GOP legislators. First-year Republican representatives have been given only one committee assignment this year—normally representatives serve on at least two committees.

If the measure passes the Kentucky House, Senate and is approved by Governor Beshear, it would still have to be approved by Kentucky voters in the November election. The earliest cities would be able to put a local option sales tax measure on the ballot would be November 2018.

Ryland Barton is the Managing Editor for Collaboratives. Email Ryland at rbarton@lpm.org.