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Under Bevin, Future Of Local Option Sales Tax Unclear

Gov. Matt Bevin
J. Tyler Franklin
Gov. Matt Bevin

The possibility of a new law enabling local option sales taxes in Kentucky is murkier with the election of a governor who has repeatedly voiced opposition to the idea.

Such a law would allow local governments to add a temporary 1 percent tax to the sales tax in their districts, with proceeds going toward local development projects. Residents would vote on whether to fund a specific project, and the tax would expire once the project was paid for.

Louisville Mayor Greg Fischer, the leading supporter of the measure, said he’s not sure how the bill would fare with Governor-elect Matt Bevin's administration in Frankfort.

“Right now it’s a dynamic time with him coming into office and the state understanding what his priorities might be,” said Fischer, a Democrat. “We’ll certainly be pitching, not just me but people all over the state, the importance of having a local option.”

Republican Bevin opposed the local-option measure during the campaign, though he also said he's open to following the wishes of voters on the issue. A Bevin spokeswoman directed WFPL News to comments he made during the campaign to the Kentucky Chamber of Commerce, in which he said a local option law could "allow Frankfort to pass the buck, so to speak, to the local level."

Bevin also said he understood that it could benefit some cities.

The local option measure would require a constitutional amendment and would not need Bevin’s signature to become law. Still, a governor’s buy-in would be instrumental in drumming up legislative support for the measure, which needs 60 out of 100 votes in the state House and 23 out of 38 votes in the state Senate for approval.

The amendment would also have to pass a voter referendum during the general election in November 2016. Bevin also said during the campaign that the issue should go before Kentucky voters.

Republicans have a list of priorities for the session that begins in January, including right-to-work legislation and rolling back the state's Medicaid expansion. The local option measure may struggle to gain traction.

“I hope this session is a session where it can pass,” said Fischer.

This year, Democratic Gov. Steve Beshear endorsed the bill, which narrowly passed out of the House, with 62 votes in favor. It then languished in the Senate, as industries — most significantly the energy sector — began to request carve-outs from the additional tax on their products.

Unlike residential power consumers, industrial consumers aren't exempt from paying sales taxes on their power bills. A group called the Kentucky Industrial Utility Customers predicted that large companies would have to pay up to $24 million more per year as a result of a local option sales tax.

Local option supporters have changed their proposal to make sure the energy industry won’t be negatively affected, said Bryan Sunderland, a spokesman for the Kentucky Chamber of Commerce, which supports the bill.

“We should make sure that any kind of local option doesn’t increase the cost of energy. That’s such a critical advantage for our state,” Sunderland said. “I believe that issue has been sufficiently addressed.”

Even without being able to veto the bill, Bevin’s lack of support for the local option could hurt its chances.

“I’d be really hesitant to suggest that its prospects are any brighter or any dimmer,” Sunderland said.

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