Boyle payroll taxes could be impacted if county hits 30,000 in 2020

Published 7:55 am Tuesday, April 11, 2017

Boyle County is likely to top 30,000 people when the 2020 Census rolls around, but more people doesn’t necessarily mean more money, at least not for the county government.

A law that only affects counties with 30,000 or more people has the potential to essentially cap Boyle County’s payroll tax revenue from Danville residents — or even zero it out entirely.

That law allows for payroll taxes paid to a city to be credited against the payroll taxes owed to a county government, according to information provided by Chris Johnson with the Kentucky League of Cities.

For example, if a worker usually pays $10 from a paycheck to a county and $5 to a city in that county, the $5 would count as a credit against the county tax and the worker would only pay $5 to the county. If the rates are reversed and the worker usually pays $5 to the county and $10 to the city, the credit for city taxes would completely cancel out the county taxes and the worker would pay $0 to the county.

That is, at least, the basic theory, Boyle County Judge-Executive Harold McKinney and Boyle County Treasurer Mary Conley confirmed Monday. But things are far more complicated than that and many questions about how the law would actually change things in Boyle County remain up in the air, they said.

Kentucky law also exempts counties from crediting city residents if the county imposed its tax under “the county home rule statute,” according to Johnson. Conley said Boyle’s tax is indeed implemented through that statute, meaning the current county tax of .75 percent (7.5 cents for every $10 earned) would not be affected.

However, a county raising its payroll tax rate after it reaches 30,000, “then the county is required to allow the credit to the extent of the increase or new tax,” according to Johnson.

Depending on how that portion of the law is interpreted, it could mean different things, McKinney said: It could mean that Boyle County can keep its .75-percent payroll tax, but Danville residents would be credited on their paychecks for any future increases. Or it could mean that if Boyle County were to hit the official 30,000 mark and then increase its payroll tax, that the entirety of its tax would be subject to the credit, essentially eliminating county payroll taxes on jobs inside the city.

“There’s more research needed to know what our alternative paths are and what has been litigated and what has not been litigated,” McKinney said.

But whatever more research turns up, “it’s pretty clear that no matter how you interpret the new stuff, when we cross 30,000, we’re stuck where we are,” he said.

The City of Danville currently charges a 1.5-percent payroll tax, also called an occupational license fee, which is twice as much as Boyle County’s .75 percent. That means if Danville workers were allowed to credit their city payroll taxes against their county payroll taxes, the county taxes would be zeroed out.

None of this can take effect — whatever the effect may be — until the 2020 Census gives Boyle County its new official population number. McKinney said he thinks right now, Boyle has “about 29,500 people, give or take 250 either way.” 

The Census’ unofficial estimate of Boyle County’s population as of July 1, 2016, was 30,018.

But despite the official Census being years away, McKinney said this is an issue today. For one thing, he’s been advised that if the county wants to raise its payroll tax before it hits 30,000, it should do that before 2020, so there aren’t any questions about overlap with the Census. “We don’t want to be a test case,” he said.

And officials also need to figure out exactly what the potential impacts will be so they can prepare.

“It’s an issue right now because we have to think past the next fiscal year and we have to think way past the next fiscal year as we deal with the jail issues,” he said.

Boyle County’s jail is regularly well over its stated capacity of 220 and officials are looking into building a new jail facility. The current jail facility will be paid off next year.

“At some point over the next couple of years, the Boyle County Fiscal Court obviously has to make some decisions on how we want to handle payroll taxes going forward,” McKinney said. 

One possible resolution to the whole thing is if the legislature repeals the law creating the tax credit. McKinney said he’s heard that idea talked about, but “that’s worth what you’re paying for it, and you’re not paying anything for it.”

“But I’ll tell you,” he continued, “if the county judges get a seat at the table, that’s one thing we will advocate for.”

As far as anything Boyle County Fiscal Court could do at this point, McKinney said he thinks the county must wait to see if a special session of the Kentucky Legislature is called this year and what comes out of such a session before it takes any action.

“We have to be vigilant and we have to be aware and we have to be ready to move with some expedition with what comes out of the special session,” he said. “We’re pretty certain this is coming down the pike. We’ll have to make a decision on something.”