Boyle’s payroll tax plan proves state law is flawed
Published 4:38 pm Wednesday, November 13, 2019
A month ago, we predicted that an archaic Kentucky law would help cause a tax increase in Boyle County. Now, it looks like that’s going to happen even sooner than expected.
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The Boyle County Fiscal Court voted 5-1 Tuesday to pass first reading of an ordinance that would increase the county’s payroll and net profits taxes. A second reading seems likely to pass, which would increase taxes on Boyle County workers and businesses beginning Jan. 1.
The increase amounts to an extra 50 cents out of every $100 earned by workers and the same amount from profits made by businesses. That adds up to someone making a $30,000 salary paying Boyle County an additional $150 a year.
Broadly speaking, officials say that money will go to fund a new jail and state-mandated retirement payments that may increase by 12% annually for another decade still. There isn’t much if any wiggle room on either of those expense lines and anyone who’s been paying attention for the past two years should have known some kind of tax increase at the county level was coming.
But did Boyle County need to increase its taxes by two-thirds right now? Absolutely not. Those retirement payments are scary, but they are scary long-term, not tomorrow. And the county hasn’t even decided 100-percent what jail facility it wants to build, let alone taken out bonds for construction that require debt payments.
But Boyle has to act now or lose its ability to act later, thanks to Kentucky’s 30,000-population penalty on local tax control. When the 2020 Census certifies that Boyle County’s population has reached that mark, the county will effectively lose the ability to increase its payroll tax rate, because any increase would result in the county forfeiting payroll taxes collected in the City of Danville.
As we’ve noted previously, while the law winds up blocking any future tax increases, it also dis-incentivizes future decreases in taxes. Government isn’t going to lower taxes in good times if it doesn’t have the ability to bring taxes back up when necessary.
State law ought to leave a lot of control over local purse strings to local governments. When the law does preempt local control, it should be to prevent things like fraud and corruption. At the least, state law shouldn’t make it harder for local governments to make thoughtful, moderate decisions.
Boyle’s pursuit of such a substantial tax increase on such a short timetable proves the state law is making it harder, not easier to run local government well.