Local option sales tax proposal moves forward

FRANKFORT-- The House today advanced a proposed constitutional amendment that could ultimately give cities and counties the ability to levy up to a penny in sales tax for specific local projects.

The passage of House Bill 2, sponsored by House Speaker Greg Stumbo, D-Prestonsburg and House Minority Floor Leader Jeff Hoover, R-Jamestown, by both the House and Senate is required to put the proposed amendment on statewide ballot this November. Should the amendment be approved by Kentucky voters this fall, it would allow the General Assembly to give cities and counties the power to hold a local option sales tax referendum. Local voters could then decide whether to allow their local government to levy a limited sales tax of up to one percent to pay for a proposed infrastructure project, like sewer plants or convention centers.

The tax would be eliminated once a project is paid off, according to the legislation.

"It's done in other states across the nation, rather effectively," said Stumbo, adding that the proposal has bipartisan support.

Hoover said he has always supported the proposal, adding that he does "encourage the members in here to support it, and let's pass it out and await action in the Senate."

"I have always believed that this is an opportunity for local governments to make local decisions for local citizens to be involved in making decisions on projects that may be important to their community," said Hoover.

Among those voting against the bill were Rep. Jim Wayne, D-Louisville, who has long encouraged comprehensive tax reform in the General Assembly. Wayne said all sales taxes disproportionately burden low-income wage earners.

"You say, 'well it's just a penny.' But ladies and gentlemen, for a person in the lowest 20 percent of income families in our state, which is (an income of) $16,000 and below, those people it is estimated would pay an additional $70 a year because of this tax. The top 1 percent (of wage earners) would pay $350 a year," said Wayne.

HB 2 passed the House by a vote of 60-31 and now goes to the Senate. Following its approval of HB 2, the House voted 55-36 to pass HB 374 which would set out how local option sales taxes could be used if the constitutional amendment proposed by HB 2 is approved by voters in November.

Known as the "enabling legislation" for the proposed constitutional amendment found in HB 2, HB 374, sponsored by Rep. Tommy Thompson, D-Owensboro, would set out the rules and requirements for a local option sales tax levy in Kentucky. It would stipulate that only infrastructure projects would qualify for a local option sales tax levy and that one levy could cover a maximum of 10 projects, among other rules.

HB 374 also now goes to the Senate for consideration.

Legislation similar to HB 2 passed the House by a vote of 62-35 in 2015 but did not pass the Senate.