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October 25, 2022 1:16pm

GLI testifies on local tax reform ahead of 2023 session

GLI’s Shelby Somervell joined other local business organizations and advocacy groups from across the state to testify to the Interim Joint Committee on Appropriations and Revenue on the importance of local tax reform. Somervell joined Representative Michael Meredith (R-Oakland) a long-time champion of local tax reform and co-sponsor of HB 475 and HB 476 in the 2022 legislative session, and representatives from the Kentucky League of Cities, the Kentucky Association of Counties, Commerce Lexington, You Decide, Kentucky!, and the Lake Barkley Partnership. Local tax reform has been a top GLI priority for many years, and last year it fell short of final passage when it was passed by the state House but did not clear a final vote in the Senate.

The panel highlighted the need for modernization of the tax structure in the Commonwealth to spur economic development and stay competitive with neighboring states. The first step is for the General Assembly to pass a bill to put the initiative on the ballot to propose amending Section 181 of the Kentucky Constitution. Should voters approve the amendment, the General Assembly would then have the task of establishing guidelines for cities and counties to implement a local tax if they choose.

During her testimony, Somervell applauded the passage of HB 8 during the 2022 session, which will incrementally reduce and eventually eliminate the state income tax, but she added that those benefits would not be fully realized unless critical improvements are made to the local tax structure. Because cities and counties do not have the flexibility to shape their own tax structure, many communities, like Louisville, are at a disadvantage compared to peer cities. She cited conversations from GLI’s recent Greater Louisville Idea Development Expedition (GLIDE) trip to Jacksonville, Florida, where government officials and business leaders credited the local tax option for creating needed infrastructure and economic investment to create population and business growth. Somervell shared that local tax reform will give cities and counties the tools that they need to thrive, promote business development, support economic growth, and attract and retain top talent.

In a stark visual representation of the implications of an out-of-date tax framework, Rep. Meredith showed a map of the Kentucky-Tennessee border. The map showed significant development and growth on the Tennessee side of the state line, thanks to the state’s more favorable tax structure.

Rep. Michael Meredith, R-Oakland, displays a map of the Kentucky-Tennessee border during a meeting of the Interim Joint Committee on Appropriations and Revenue.

As it stands, cities and counties have little to no options when accessing additional funds for special projects. Amending Section 181 would allow the General Assembly the authority to create a new framework for local taxation that empowers cities and counties to make investment decisions that result in maximum benefit for their residents.

GLI is pushing for the bill to pass next session. Be sure to stay up to date on the latest by subscribing to our Policy Distilled emails and following @GLIadvocacy on twitter.