Newport, along with other Northern Kentucky municipalities, is opposing a newly introduced bill to centralize the collection of local occupational business taxes.
If approved, House Bill 253 would require the Office of the State Treasurer to develop a web-based system for the centralized reporting, collection and distribution of occupational license fees. Boone County and cities like Union, Fort Mitchell, Fort Wright, and Newport have spoken out against the bill.
“This is loss of local control,” said Newport Assistant City Manager Brian Steffen at a Feb. 3 special meeting. “We don’t know exactly what the state’s rules will be on this. If it will run smoothly, most likely, it will not. With our heavy burden on occupational license taxes, it’s very important that we approve this resolution and send a message to the legislature in Frankfort.”
Steffen said the state started floating the idea in 2012 of a centralized occupational license or payroll tax collection system where payroll tax would be collected for all cities and communities across the state but failed to get any traction then.
HB253 was introduced to the committee on committees on Feb. 4 by Representative Jared Bauman, a Republican from Louisville.
The bill would also:
- Create a working group to be chaired by the state treasurer.
- Require the working group to recommend creating a centralized system for modernizing the reporting, collection and distribution of local business taxes and fees.
Steffen said the Kentucky League of Cities, also known locally as KLC, has the bill at the top of its priority list and is asking cities to enact a resolution opposing the centralized system.
KLC Executive Director/CEO J.D. Chaney said via the KLC website that the league will “vigorously oppose the legislation.”
KLC provides cities, leaders and employees with services such as legislative advocacy, legal services, community consulting, training and online training, policy development, and research.
“The Kentucky League of Cities Board of Directors voted to oppose the centralized collection of occupational taxes, and that is exactly what the league will do,” Chaney said on the KLC website. “This bill is added governmental bureaucracy and will only complicate the process of collecting occupational taxes, a vital revenue source for cities that funds critical infrastructure as well as emergency services, like police and firefighters.
“Cities are the economic engine of Kentucky, and we will do everything we can to protect that engine from unintended consequences of government overreach and expenses, which this bill would create.”
Steffen said Newport’s city budget is derived 40%, at minimum, from occupational license or payroll tax.
“This puts a heavy burden on that system and the collection of that tax, and the state is looking to create a system in which they are the clearinghouse for the collection of that tax,” he said. “There is a whole range of issues which this creates.”
Steffen said one of those issues was confusion among the taxpayers and the communities this would affect.
Beyond that, he said no current system exists for centralized collection, so one would have to be created.
“This is also going to increase fees along the way,” Steffen said. “This is certainly not going to be done for free, so the taxpayer and possibly the communities and cities would also be paying fees to the state for the service.”
Steffen said the bill is trying to fix something that isn’t broken. Newport and other communities across the Commonwealth have been collecting payroll or occupational license taxes for decades.
Bauman said via Facebook post that the bill would simplify the tax payment process and reduce administrative burdens for businesses of all sizes.
“The measure leverages technology to create a more efficient government while helping businesses avoid late fees and other issues that come with in-person or mailed payments,” Bauman said via Facebook. “In-person and mailed payments can lead to several issues, including: delays and lost payments, manual processing errors, employee time consumption, lack of immediate attention, and security risks, such as stolen or lost checks, potentially leading to financial loss.”
Newport Commissioner Mike Radwanski said he strongly opposed the bill.
“I think a lot of people, when they think of cities, that the vast majority of our funds come in through property taxes; our payroll taxes is our bread and butter, folks,” he said. “This is absolutely critical to us to provide the services that we provide to our constituents, and that also applies to our business owners as well. I think it is a vast overreach that is very unnecessary.”
Newport Commissioner Aaron Sutherland also opposed the bill.
“The schools really take the bulk of our property taxes as far as real property, and the city really is funded in large part by these occupational licensing fees,” Sutherland said. “Centralizing it and either adding to the fees or creating extra hoops for business owners is just not a good idea.”
HB253 currently has two cosponsors: Representative Daniel Fister, a Republican whose district covers several counties in Central Kentucky, and Representative Rachel Roarx, a Democrat whose district covers part of Jefferson County.
Steffen said this all comes back to economic development. He said Newport has been strong in its economic development over the years, bringing in jobs and businesses because it pays the bills.
Newport Mayor Tom Guidugli Jr. said there are no efficiencies with the bill.
“This is all within the balance that the state already mandates,” he said. “So, the only thing they want to do is take all the money and then have us beg and ask for money back.”
