April 27, 2022 12:34pm
OP-ED: New pro-growth policies make Louisville equipped to compete
This article originally appeared in Louisville Business First on April 27, 2022
A shortage of qualified and skilled talent is the biggest threat to Greater Louisville’s growth. It is a problem that is decades in the making and addressing underlying causes of lagging workforce participation is only one part of the solution.
The reality is Kentucky is a state of just over 4 million individuals. And while greater Louisville makes up over one fourth of the state’s total population, our rate of growth is falling far behind that of our peer cities.
In the age of remote work and the post-pandemic mindset that work is not tied to a specific location, it has never been more important for our region to market itself and differentiate our assets. That’s the goal of our Live in Lou campaign and we have found that Greater Louisville’s low cost of living relative to other large metropolitan areas makes our region extremely attractive to emerging talent.
Couple that with our thriving arts and culture scene, amenities and civic engagement opportunities and we really should be seeing explosive growth.
So, what is the missing ingredient that our neighbors like Nashville and Indianapolis have included in their recipe for success?
The answer can be found in our antiquated tax policies, which make it hard to compete with many of our neighbors for talent. For far too long, we have been losing talent to Indiana, which recently passed legislation to drop its personal income tax rate below 3% before the end of the decade, and Tennessee, which fully eliminated its personal income tax.
With an income tax rate sitting at 5%, we have one of the highest state income tax rates in the region.
A person could move to Tennessee and make 5% more for the same job available in Louisville. This is also a deterrent for businesses looking to relocate or expand, especially those with high-paying and executive level positions.
Fortunately, the Kentucky General Assembly took bold action to help our region better compete with peer markets this session. Through House Bill 8, which was a top GLI priority from GLI’s legislative agenda that has been signed into law, Kentucky’s state personal income tax will be lowered in increments of .5% until it is eventually eliminated. The legislation also includes important safeguards to ensure the state remains financially stable in the process. Many groups supported this pro-growth legislation, and we are pleased to see it cross the finish line.
Local tax reform is a key component of comprehensive tax reform. The Kentucky Constitution currently limits the powers of both the state legislature and local municipalities to diversify their revenue streams. Occupational taxes remain the primary revenue generator in Greater Louisville. By limiting avenues for revenue generation, local governments are strained and unable to invest in the quality-of-life assets that are critical to growing a thriving community and economy.
We were optimistic about the positive momentum of House Bill 475, which would give Kentuckians the opportunity to vote on amending the Kentucky Constitution to allow for local tax reform. While the legislation did not make it across the finish line in 2022, we are hopeful it will be a priority in the future legislative sessions to build on the bold reforms enacted this year. These changes coupled with the substantial investments made in infrastructure and community assets in the biennial budget will put our community on the path to continued growth and success.
Tax reforms are about more than a few extra dollars in a paycheck. They are about signaling that Kentucky is ready and able to compete with peer markets by embracing pro-growth policies. It is these policies that will bring the best and the brightest to Kentucky and keep them here.
— Sarah Davasher-Wisdom is president and CEO of Greater Louisville Inc.