Daily Independent (Ashland, KY)

Editorials

June 11, 2013

A necessary evil

Payroll tax hike probably is best option available to city

ASHLAND — The shifting of the tax burden that began when the Ashland Board of City Commissioners first adopted the payroll tax in the 1990s continues as the mayor and four elected commissioners prepare to increase the payroll tax from 1.5 to 2 percent while at the same time decreasing property taxes.

Simply put that means those who own property and live in the city, but work outside of Ashland, will see that taxes they pay to operate city government decline while those who work in Ashland but live elsewhere will see their taxes incease. Those who own property in Ashland and work in the city will see their property taxes but their payroll increase, and the chances are their increase in payroll taxes will be more than their decrease in property taxes.

That’s the type of shift in tax burden that elected city commissioners love because the many property owners in the city who work elsewhere will be paying less in taxes to the city of Ashland, and the hope is they will thank city commissioners for the tax break the next time they go to the polls.

Meanwhile, those who work in the city but live elsewhere can’t vote in city elections and have no way of registering their objections to the tax hike. In essence, while they will be paying much more to support city government than many residents of the city, they have no voice in city government.

That’s why we so dislike the payroll tax. It’s unfair. For non-residents of Ashland who work in the city, it is the epitome of taxation without representation. Nonresidents may hate the hundreds of dollars in payroll taxes they will pay each year but there is nothing they can do about it. The only way they can avoid the tax is to find employment outside of Ashland.

Despite our dislike for the payroll tax, what the city commission is about to do is probably the best option available to it. While we hate the payroll tax and consider it unfair, it is a necessary evilbecause cities in Kentucky are so limited in how they can generate revenue. The city could raise property taxes, of course, or simply raise the payroll tax without giving a tax break for property owners. Both would prove unpopular with those who can vote in city elections. So would an increase in the tax on insurance policies. The commissioners also could reimpose the old city stickers, but that method of raising revenue was never effectively enforced. No one misses that tax.

What is needed is a comprehenvie state tax reform plan that would give cities, counties and school districts more options for raising revenue. A 2 percent city income tax would be much more fair than the payroll tax, but that would require a state constitutional amendment. A local option sales tax is an effective way of raising revenue in the neighboring states of Ohio and Tennessee, but it is not an option for Kentucky cities.

Thus, until when or if local government has more options, we are probably stuck with the payroll tax. While we don’t like paying more city taxes while most of our neighbors are seeing a decrease in their tax burden, those of us who live and work in Ashland at least have a voice in its government. Those who work in Ashland but live elsewehere likely will be paying more in city taxes than the majority of people who live here. That’s not fair, but that’s the way it is.

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