The Kenton County Fiscal Court voted to reduce payroll tax rates for workers and eliminate taxes on net profits for businesses in the county at their meeting last week.
The vote conforms with previous statements from fiscal court members that they would make adjustments to their tax policy after analyzing the county’s revenue collections from this year: The elimination of the net profit tax was the result of increased revenue collections throughout 2023, said Kenton County Treasurer Roy Cox.
The new rates, which will take effect on the first day of January 2024, will likely reduce the tax burden for workers in Kenton County, at least at the county level.
This is the second change in county occupational taxes over the last two years. The court voted for payroll tax rate increase as well as an increase in the taxable wage cap, adjustments that took effect at the beginning of 2023, on Election Day in 2022. This policy change, as well as the manner in which the court passed the increase, proved unpopular among some city leaders and entailed a greater tax burden for many who worked in Kenton County.
Beginning in 2023, the payroll tax rate went from 0.7097% on all wages under $25,000 to 0.9097% on all wages under $80,100. The $80,100 figure in 2023 was half of the federal Social Security cap, which varies from year to year. 2023’s tax rate on net business profits was also 0.9097% on all net profits under $80,100.
The new ordinance changes both the rate at which workers are taxed as well as the amount of wages and profits the county can tax. The new rates for 2024 will reduce the payroll tax to 0.6997 % on all wages below 100% of the federal Social Security cap, which will be $168,600 in 2024. Wages above the cap will not be subject to occupational taxes. These rates will apply to all workers performing their jobs in Kenton County, even if they don’t live in the county.
Net profits for businesses, on the other hand, will not be taxed at all, although firms will still be required to report their profits every year to the county. This exemption will be reviewed every two years from 2024 onward (click here to view a table showing all of the occupational taxes in Kenton County for 2024)
These changes will have no direct effect on tax rates at the city level.
Kenton County Commissioner Joe Nienaber touted the tax reduction as the lowest payroll tax rate from Kenton County in 28 years.
The tax increase that took effect in 2023 was unpopular among some city leaders in the county. The vote to increase the taxes occurred on Nov. 8, 2022, which was Election Day, when people were busy at the polls. Moreover, many city leaders felt they had not been consulted about the change before it was made.
In statements leading up to the passage of the 2023 rate increase, County Treasurer Roy Cox gave the county’s rationale for the increase: It would allow the county to readjust its taxation structure to reduce property taxes on residents such that the budget would become less reliant on payroll taxes, which historically have made up a disproportionate amount of the county’s revenue.
“In making the changes over the past two years, it is projected occupational taxes
will once again account for 50% of the county’s primary revenue, and relieve
property owners of their current and future burden,” said a press release from the county about the adjustments.
In August, the court lowered the property tax rate on Kenton County homeowners to 13.3 cents for every $100 of property they own, a reduction from last year’s rate of 14.4 cents per $100. This is below the compensating rate — or the rate needed to draw in the same amount of revenue in the preceding year — of 13.4 cents per $100 (read our tax explainer for a refresher on how property taxes work).
Cox claimed that the 2024 rate and cap change would allow the county to bring in more revenue than the rate and cap from 2023. He added that the county is likely to bring in more revenue than initially projected this year, enough to completely eliminate the net profits tax for 2024.
“We were actually projecting $10.6 million increase for the revenue for 2023,” Cox said. “My latest projections are $12.1 million. So that’s what allows us to take the net profit tax down to zero. For next year, that number should be approximately $10.3 million.”
Judge/Executive Kris Knochelmann maintained that the tax policies the court had instituted over the past year were the right decision, but he admitted he could have acted differently and took steps this time to avoid the same pitfalls.
“The mistake that I did make last time when we made the adjustment upward was to not inform the cities,” Knochelmann said. “Tomorrow we will be sending an email out to the cities and letting them know that we’ve now cut it down.”
Knochelmann thanked the treasurer and other county staff for their work.
Nienaber said that the elimination of the net profits tax would be helpful for business development in county–critics of the occupational tax increase feared that the higher rates would stifle economic development. He said he could attest to that as someone who owned and operated businesses in both Kenton and Boone Counties.
“What we did today is, it helped the citizens of Covington, it helped the citizens of Elranger, Independence, Fort Wright…,” said Nienaber, “but it also made Kenton County more attractive to business, and that was always in the plan.”
Coupled with the reduction in property taxes, Nienaber argued that now Kenton County was more tax friendly than it’s been in a long time.
“It’s a step in the right direction to try to make this a more business and tax friendly locale so that businesses want to come here,” said Fort Wright Mayor David Hatter. Hatter was not among the more strident critics of the 2023 increase, but he appreciated the new change nonetheless.
LINK nky reached out to other city leaders for comment on the change, but Hatter was the only one who responded to a call to comment at the time of this article’s publication. Additional comments and announcements will be added if they become available.
Read the full text of the new ordinance here.
The next meeting of the Kenton County Fiscal Court will take place on Tuesday, Nov. 14 at 5:30 p.m. at the Kenton County Courthouse on Madison Pike.