Jefferson County members talk tax reform with mayor

A small group of Jefferson County chapter members met with Louisville Mayor Greg Fischer last month to find common ground about the need for revenue.

The meeting came about as a result of an encounter in March between KFTC members and the mayor in Frankfort. Members were in Frankfort for our Economic Justice Lobby Day to lift up the need for fair and adequate statewide tax reform; Mayor Fischer was seeking support for his local option sales tax initiative. KFTC decided to oppose the local option sales tax mostly because it takes more from the budgets of low-income people than from higher-income people.  There has also been concern that revenue from it would not be sustainable or flexible enough to meet community needs. 

Despite our differences, we took the opportunity to ask for his support of our efforts for statewide tax reform. He told us that he had been supportive of these efforts in the past, and that he would continue to support them. I then wrote the mayor a letter asking for a meeting to see how we could work together toward our common goals.

Mayor Fischer agreed to meet with us at our chapter office for an hour, but his schedule changed and we got 45 minutes at his office. Becki Winchel gave a brief introduction to our economic justice work, and reminded him that he has been a member of KFTC. She  also explained why we seek both fairness and adequacy in tax policy and why we work together across the state to win issues. The mayor acknowledged that he has been a member of KFTC and that we have sometimes agreed and sometimes disagreed with each other on issues.

We then talked about the important things that we and other Louisvillians have at stake in the state budget. Pam Newman said that as a budding entrepreneur and as someone concerned about the disconnect between boarded up homes and people without homes in her community, she wants to see more commitment to a caring and supportive economy in Louisville. Local agencies that address these issues rely on state funding. 

I talked about barriers to opportunity that I and my neighbors have experienced including rising tuition costs and unfunded financial aid for students, along with cuts to childcare for working families that are due to cuts in state funding.   

We pointed out that these problems are made worse by unfairness in our state and local tax structures — people just over the poverty line pay about 10 cents of their income in combined state and local taxes for every nickel that those with the highest incomes pay. These critical local issues can only be resolved with better statewide tax policy.    

We discussed policy solutions, including our Kentucky Forward Plan – which would make the state income tax progressive, modernize the sales tax, close a loophole in the estate tax and enact a state Earned Income Tax Credit (EITC). We showed how Kentucky Forward would make our state tax structure more fair and adequate and enable more revenue for cities and localities. A state EITC, for example, would put $23 million into the household budgets of 70,000 working families in Jefferson County, which would surely boost the Louisville economy. I suggested that the mayor could help communicate the benefits of these policies to Louisvillians.

We also presented policy solutions that are in line with our principles and of particular interest to our city budget, that our members might be willing to work with the mayor on. As the mayor pointed out, most of Louisville's revenue comes from a mix of property and occupational taxes. We discussed the possibility of removing a statewide cap on property tax increases, which has led to a 42% decline in Jefferson County property tax revenues since 1978. Kentucky ranks 45^th among states for property tax revenue. We suggested that the cap could be removed and that the homestead exemption based on age and disability status be replaced with an income-based “circuit-breaker” to help ensure fairness. This would be a fair and adequate source of revenue to build the healthy communities we want. 

We then brought up our interest in his 2012 suggestion to the Blue Ribbon Commission to consider expanding the occupational tax to include dividends and rental income, rather than only wages. We asked for more information about this proposal that would be more in line with our principles of fairness and that could provide funding to local agencies that make our communities stronger. The procedure for enacting an expansion of the occupational tax would — like the local option sales tax — require a statewide constitutional amendment to expand local taxing power. But overall it seems less cumbersome to enact than the local option sales tax initiative. However he seemed to have abandoned the idea of occupational tax expansion in favor of the local option sales tax.

The mayor countered that while he is generally supportive of the policies we suggested, he wasn't sure there was political will in Frankfort to accomplish them and didn't want to wait twenty years for them to happen. He pointed out that his is the first local administration to push Frankfort for revenue, but we also know that mayors in other states are taking leadership roles to hold their legislatures accountable. We challenged him to consider using some of the vigor and energy he has brought to the local option sales tax discussion to lift up good policies that are more fair and more sustainable.  

Though we didn't seem to get strong commitments from the mayor to work for revenue that is more aligned with KFTC principles, we did get some information and ideas from him and his staff about ways we can consider working together with his office and state elected officials on economic justice issues around housing. We haven't had a chance to discuss the ideas yet as a chapter. We also got a commitment to meet with his staff before the state general session starts again to see what opportunities there may be to work together during the session.   

We hoped that the mayor would agree to be a stronger advocate for a more fair, adequate, sustainable tax policy. But I still see this as an exciting opportunity to work with him and his administration, and I think there may be other ways we haven't yet discovered to make something really good happen from this effort to find common ground.  

I encourage members in other cities to consider a similar effort with your local officials — Mayor Fischer has been actively engaging with many of them, too, and we can't know which way these things will bend. Let me tell you how some people are bending it, and maybe we can bend it another way.

There is a local economist named Paul Coomes who has convinced some perfectly good people in Louisville that we send too much money to Frankfort and don't get enough back — which seems to me like arbitrary divisiveness in an effort to push bad policies like the local option sales tax. Now Louisville is joining with other cities in the “Metropolitan Alliance for Growth” to garner support for a regressive unsustainable tax, supposedly to yield more weight in Frankfort as opposed to rural areas.

KFTC is about bringing people in rural areas and people in cities to work together to lift us all up. So it seems like we should be aware of this effort to divide us, and perhaps wield that awareness like judo masters. We know relationships take time, and productive ones take honesty, trust and respect. It was a first for us to engage the mayor in this way, and it remains an exciting challenge to build the relationship. We're not all the way there, but I think our meeting is a step in the right direction to encourage the mayor and Louisvillians to consider their stake in the state budget, to see through divisive policies, and to understand the importance of both fairness and adequacy in state and local tax policy.