I bet you didn’t get out of bed this morning thinking about a local option sales tax. But a number of the state’s business and political leaders are considering the issue as a way for cities to fund special projects during these tough economic times. We discussed the topic on Monday’s edition of Kentucky Tonight and I thought I’d share some of that conversation with you.
Since the adoption of the 1891 Kentucky Constitution, cities and counties in the Commonwealth have been preempted from levying or collecting what are called local option sales taxes (sometimes referred to as L.O.S.T.). According to the Kentucky League of Cities, 38 states across the country currently allow one or more of their local governments to collect the tax. Furthermore, all of our neighboring states except Indiana allow at least one local government to levy the tax. Kentucky communities generally rely on other means of collecting operating funds, such as payroll, property, and occupational taxes.
How would a city or county use the tax? One example cited in our discussion was Oklahoma City. Voters there approved local option sales taxes in 1993. Since then, the taxes have raised $990 million to fund a range of projects, including a new convention center, new facilities for the Oklahoma City Thunder NBA franchise, a new minor league ballpark, renovations to every public school, and public park and transportation improvements.
But as was pointed out on Kentucky Tonight, Oklahoma City is not poor – it collects substantial tax revenues from its vast energy businesses. Opponents also make the point that L.O.S.T is yet another tax burden on citizens, many of whom continue to struggle with the sluggish post-recession economy.
Our conversation included Covington Mayor Sherry Carran, Louisville Metro Councilman Ken Fleming, Kevin Gordon of the Independent Business Association of Northern Kentucky, and state Senator Kathy Stein of Lexington. Stein has sponsored legislation to put the local option sales tax on the ballot in the form of a constitutional amendment. Gordon blames legislators for not better managing state funds, which he says would make a local option sales tax unnecessary.