To: The Kentucky State House, The Kentucky State Senate, and Governor Matt Bevin
Reject KY HB 399 - the Regressive Local Option Sales Tax Amendment (LOST/"LIFT")
We oppose bill HB 399, the proposed amendment to the Kentucky state constitution that would allow localities to hold referendums on whether to levy an incremental sales tax for "special projects".
Sales taxes are regressive, as they take a greater percentage of income from lower income people than those with higher incomes.
There are less regressive ways for localities to raise revenues.
Sales taxes are regressive, as they take a greater percentage of income from lower income people than those with higher incomes.
There are less regressive ways for localities to raise revenues.
Why is this important?
The Kentucky House and Senate are currently considering an amendment to the state constitution, and as of this writing, HB 399 has passed out of committee in the House and may be headed to the floor. This amendment would allow an incremental (up to 1%) increase in the sales tax if citizens in a locality vote in favor of it by referendum.
The primary problem with this amendment is that it asks more from people who can least afford it. When most or all of someone's income goes toward affording basic needs, a tax increase can have a big impact on quality of life. (I know this personally from growing up with limited means.)
Another problem is that such a referendum acts regressively by giving effective decision power to those with greater means to impose this tax on those with lesser means.
A third concern is that those paying a greater share of their income toward this new sales tax will not have adequate representation in the process for deciding which corresponding capital projects are selected (and likely won't even if the funding method was more equitable).
Overall, we believe it is economically and socially unsustainable to build local projects by asking the most from those who can afford it least.
We support fair taxation and other equitable avenues for acquiring funds in consideration of new community projects that enrich us all. Alternative, less regressive methods for funding projects include raising rates on existing taxes that are more progressive in design, creating or raising fees for particular licenses/services, selling bonds, or seeking state/federal appropriations/incentives. Localities in Kentucky have the power to utilize these funding methods today without this amendment.
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Check out these further resources:
1) Testimony on Local Option Sales Tax to Interim Joint Committee on Local Government, Jason Bailey, Director, Kentucky Center for Economic Policy, September 25, 2013 - http://www.kypolicy.org/content/testimony-local-option-sales-tax - In addition to addressing LOST's effects on those with lesser means, Bailey discusses several other challenges with LOST.
2) KFTC Member Voices: The Local Option Sales Tax - http://www.kftc.org/blog/member-voices-local-option-sales-tax
Both of these links suggest many useful ways to make Kentucky's tax system more fair and adequate.
The primary problem with this amendment is that it asks more from people who can least afford it. When most or all of someone's income goes toward affording basic needs, a tax increase can have a big impact on quality of life. (I know this personally from growing up with limited means.)
Another problem is that such a referendum acts regressively by giving effective decision power to those with greater means to impose this tax on those with lesser means.
A third concern is that those paying a greater share of their income toward this new sales tax will not have adequate representation in the process for deciding which corresponding capital projects are selected (and likely won't even if the funding method was more equitable).
Overall, we believe it is economically and socially unsustainable to build local projects by asking the most from those who can afford it least.
We support fair taxation and other equitable avenues for acquiring funds in consideration of new community projects that enrich us all. Alternative, less regressive methods for funding projects include raising rates on existing taxes that are more progressive in design, creating or raising fees for particular licenses/services, selling bonds, or seeking state/federal appropriations/incentives. Localities in Kentucky have the power to utilize these funding methods today without this amendment.
--
Check out these further resources:
1) Testimony on Local Option Sales Tax to Interim Joint Committee on Local Government, Jason Bailey, Director, Kentucky Center for Economic Policy, September 25, 2013 - http://www.kypolicy.org/content/testimony-local-option-sales-tax - In addition to addressing LOST's effects on those with lesser means, Bailey discusses several other challenges with LOST.
2) KFTC Member Voices: The Local Option Sales Tax - http://www.kftc.org/blog/member-voices-local-option-sales-tax
Both of these links suggest many useful ways to make Kentucky's tax system more fair and adequate.