Murray City Council to Review Payroll Tax Models

Nov 16, 2016

Credit City of Murray Mayor's Office/Facebook

The Murray City Council will begin hashing out details of a possible payroll tax during a work session Thursday night, and some officials hope it will clear the air around the debated issue.

At last week’s meeting, Kentucky League of Cities deputy executive director J.D. Chaney presented tax revenues from peer cities with a payroll tax compared to Murray’s revenue from alcohol, city sticker and property taxes.  He concluded that Murray's tax portfolio was disproportionately skewed towards residents and property owners.

At that time, some council members raised questions about whether the tax would apply to retired residents with a pension income over a certain threshold. That question created some uncertainty.

But City Finance Director Luke Crawford said he’s since confirmed with Chaney that there is no legal statute that would allow such an extension of a payroll tax to pensioners.  The only people affected would be those receiving a wage from a business within the city limits.  

Crawford said tomorrow’s work session is more of an exploratory format to examine implementing a new tax or rolling back others in efforts of remaining revenue neutral.

The issue has brewed some controversy with a Change.org petition started by ex-city councilman now garnering over 1,000 signatures.

The Murray Calloway Chamber of Commerce issued a statement Thursday with three key areas for the council to keep in mind throughout the decision process.  

“We want to encourage them to take a look at where the investment would go once it does become net positive," said Chamber President Aaron Dail. "What impact would this have around consumer spending? How does that play into their decision? and then the last but probably most important is communication," Dail said.

Dail suggested the city hold at least two public forums in order for the public to better understand what implications tax reform would have on them.

About 2,102 employees reside within Murray and would see a benefit from decreasing property and vehicle tax rates. But about 7,224 employees residing outside city limits would see no such benefit, and could result in a potential $2.1M - $6.5M hit on overall consumer spending.

Credit Toni Blay, Flickr Commons

But Dail said Sunday sales, which passed 1st reading last week, could help to recoup some of that.  He said the move would benefit the 41 alcohol-licensed businesses already operating while providing an incentive for others to set up in Murray.

“So if the city opens that up, it’s another revenue source for them to bring on without changing too much but when you equate that to sales it’s about $1.7 million that the community would garner," said Dail. "And then conservatively on the tax side it would be right around $80,000 maybe $100,000 in new tax revenue.”

The city council work session is Thursday at city hall, starting at 6 p.m. The public is invited to attend.

Note: This post has been updated to for clarity regarding who would be impacted by a city payroll tax.