Commentary: LIFT Us From Wrong Priorities, Over Taxation

Jan 13, 2015

Richard Nelson

Many Kentucky lawmakers are calling a local option sales tax their highest priority this legislative session. The legislation would allow local governments to put public projects on the ballot and allow residents to vote on paying a sales tax to fund the project. This bill has been an issue among conservative groups, namely the United Kentucky Tea Party. Commentator Richard Nelson takes issue with the proposal and says Kentuckians are already over-taxed.

LIFT us from wrong priorities, over taxation

by Richard Nelson

An organization called Local Investments for Transformation (LIFT) is lobbying the legislature for the possibility of a new tax. Their slogan “let the people vote on investing in their communities,” has garnered the support of 42 Kentucky organizations along with bipartisan support in Frankfort. Who, after all, could be against city and county residents’ self-determination on taxation and the feasibility of locally funded public projects?  Sounds good, but you can’t judge a tax policy by a nifty acronym any more than you can judge a book by its cover.

Aren’t Kentuckians already taxed enough? According to the Tax Foundation, Kentucky is ranked as the 17th highest in local income tax collections, 18th highest for gasoline taxes and 22nd highest state for individual income tax.  On the other end, we rank amongst the lowest for cigarette and property taxes, and the individual tax burden is in the middle at 25th out of the 50 states. Not outrageous, until one considers that Kentucky is not a wealthy state and faces poverty like few others.

Nearly 900,000 Kentuckians live in poverty. We are the fifth most impoverished state in the nation according to Wallstreet 24/7. Eighteen percent of the population received food stamps in 2013. Only two other states had more residents on food stamps. How will LIFT help the plight of Kentucky’s poor? It won’t. In fact, sales tax increases disproportionally hurt the poor.

Why not consider other policy changes without increasing taxes to free up local monies? Repealing the prevailing wage law which significantly ramps up the cost of public projects would allow local tax dollars to go further.  How about cutting unnecessary positions in government and wasteful spending wherever it may be found? There’s a bill in Frankfort to cut jailers positions in counties that don’t have jails. It would free up an estimated $1.4- $2 million of county funds.

Proponents of LIFT argue “it is ultimately the voters who will decide.”  This may be true, but once a local project is proposed, those who stand much to gain will sell the project as a panacea to the community. It will likely amount to a one-sided marketing campaign leaving unorganized, less energetic and unfunded taxpayers and voters at the mercy of information provided by the groups most likely to benefit from the project. A hard lesson learned under President Obama’s stimulus spending is that not all public projects end up being prudent investments.

Of course, counties and cities already have the means to fund local projects. Whether a community needs a new fire station or amphitheater, they can raise funds through local income taxes, insurance taxes, property taxes, and fire dues. When the project is completed, elected officials can reduce the tax if they so choose.

The LIFT tax, designated House Bill 1 by House Speaker Greg Stumbo is a priority this legislative session. But why? The political energy spent on increasing the possibility of another tax on an already poor Kentucky would better be spent on more pressing issues.  Serious political capital needs to be spent on fixing the state pension fund which is drying up quicker than a puddle in the Mojave Desert.  How about tackling Kentucky’s outdated tax system which analysts say needs an overhaul?  Making Kentucky a more business-friendly state will attract jobs and eventually grow public funds. When this happens, communities will have the resources to build special projects that LIFT proposes— without the new tax.

Past efforts to allow for a local vote on sales tax increases dedicated to public projects were called Local Option Sales Tax. The acronym is LOST. And that’s where Kentucky might find itself if its leaders believe that instituting a new tax is more important than creating conditions that broaden the tax base which leads to real prosperity and concomitant future projects for Kentucky communities.

Richard Nelson is the executive director of the Commonwealth Policy Center, a nonpartisan public policy organization. He lives in Cadiz with his wife and children.

More about LIFT Kentucky

Note: The opinions expressed in this commentary are those of the commentator and do not necessarily reflect the views of WKMS.