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February 14, 2022 10:18am

Local tax flexibility bill introduced

Last week, Rep. Michael Meredith (R-21), introduced House Bill 475, which would be the first step in allowing local governments flexibility on their taxing structure to create forward-thinking, business friendly tax systems.  Local tax reform is a one of GLI’s top priorities for the 2022 session.

Currently, local governments are limited to the taxes they can impose by Section 181 of the Kentucky Constitution (which dates back to 1891). The section outlines a few taxation options, including property, occupational, insurance premium taxes and franchise fees. HB 475 would amend the Kentucky Constitution to allow the General Assembly to set new, modern parameters for local governments to produce revenue. If passed by 3/5 majority in both the House and Senate, the amendment would be put to a referendum on the ballot for voters to ultimately decide this November.

While this legislation would not establish a one-size-fits-all tax structure for all city and county governments, it would allow for a mix of revenues that make sense for each municipality or county. Many local governments, like Louisville, are highly dependent on occupational taxes. Occupational taxes comprise 57% of the Louisville Metro’s annual operating budget. Creating additional revenue tools is crucial for our region to maintain it competitiveness with peer cities and would allow for Louisville to continue to provide key services and meet obligations, but also to invest in economic development and future growth.

Also filed last week was House Bill 476 which clarifies that local governments cannot impose those taxes until allowed by the state.

This is a top priority for GLI and Advocacy staff is working with Rep. Meredith and leadership to advance this bill. The General Assembly must act this session to allow city and county governments in Kentucky to compete and thrive in the 21st century. Stay tuned to Policy Distilled for more updates as this legislation progresses.