House panel advances local sales tax bill

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FRANKFORT, Ky. (AP) - Hardin County leaders worry that if they can woo a major manufacturer to a 1,500-acre site near Fort Knox, the cash-strapped state government won’t be able to help with infrastructure improvements needed to finish the deal.

But a bill advanced Tuesday by a House committee would make it possible for Hardin County to cover the costs itself - if enough local voters approved a special sales tax.

The measure would give local governments the option of charging a 1 percent sales tax to pay for specific projects. The money would be restricted to a certain project or projects, and the tax would automatically expire once the project is finished.

Supporters, including Louisville Mayor Greg Fischer, say it is the best way for struggling local governments to raise money for needed projects.

“It is about local control,” said Brad Richardson, president of the Hardin County Chamber of Commerce.

Kentucky already collects a 6 percent sales tax, which brings in about $3 billion a year to state government. Most of that tax is collected by Kentucky retailers, who say they, too, are struggling and can’t afford to charge people more.

“When you raise prices, there is a drop in sales,” said Tom Underwood, state director for the Kentucky chapter of the National Federation of Independent Businesses.

The issue has already divided House Democrats, with House Speaker Greg Stumbo of Prestonsburg opposed to the bill while his chief vote counter, Majority Whip Tommy Thompson, is the bill’s primary sponsor. Stumbo said he understands why big cities like Louisville support the bill, because they get a lot of visitors who don’t live in the city.

“What they really want to do is transfer this tax to those people so they can build parks for the people that live inside the cities,” Stumbo said. “It would hamper the ability to do tax reform in the future. I don’t think it’s good for the state of Kentucky.”

Several things have to happen before local governments could collect the tax. First, Kentucky voters would have to change the state constitution to allow for the tax. Then, local governments would have to agree to put the tax on the ballot for voters to approve or disapprove.

“This isn’t a tax imposed by state government. It isn’t a tax imposed by local government. It’s people making a decision on their destiny,” Thompson said.

Copyright 2014 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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