On Tuesday morning, the state House Committee on Elections, Constitutional Amendments and Intergovernmental Affairs approved the local option sales tax in a 6-to-1 vote. One member abstained.
This is the second consecutive year the local option sales tax, which supporters have dubbed Local Investments For Transformation, or LIFT, has made the rounds in Frankfort. Last year, it failed to garner much support, particularly among rural lawmakers who viewed it as a city-driven initiative.
Louisville Mayor Greg Fischer and House Speaker Greg Stumbo testified in Tuesday’s committee hearing in favor of HB 1, which House Democrats and statewide business groups have made a top priority this year. Greater Louisville Inc., the Kentucky Chamber of Commerce, and the Kentucky League of Cities have all pushed hard for the initiative, as has Lexington Mayor Jim Gray.
HB 1 now goes to the full House for a vote, where it will need 60 votes to pass. After the hearing, Stumbo told reporters he expects lawmakers will approve it. He will need Republican support for the measure to move forward.
The bill would allow local governments to propose 1-cent sales tax increases to fund specific projects. Voters would have to approve any increases, which would sunset once the projects they fund are completed.
State Rep. Jim Wayne, D-Louisville, told the committee on Tuesday that a local option sales tax is regressive because it would place a higher burden on low-income families, who would be paying a greater percentage of their income to the tax than higher earners.
“What we have in Kentucky is a regressive system,” Wayne told the committee. He added that without comprehensive tax reform that includes programs to assist working low-income Kentuckians, such as a statewide Earned Income Tax Credit, HB 1 is a net negative.
Fischer and other supporters have been reluctant to identify potential projects funded with a local option sales tax, worried that any specifics would bog down the legislative process. But the mayor did offer IL a few insights in an interview earlier this year, saying generally that he wanted any project to have community-wide buy-in.
“We’re competing against cities that are investing all the time, that have more tools to invest than we do,” he said. “So we’ve got to be attentive to what our capital needs are here, our built environment, our public transportation issues, to compete to be one of the great large-to-medium-sized cities in the country.”