This newspaper takes strong exception to House Bill 487, which became effective July 1 and imposed sales tax on a number of service providers, including nonprofits, in order to shore up Kentucky’s underfunded pension systems.
Our concerns and objections include the process and choice of targets chosen by the Republican majority in the legislature.
The legislation was passed at the near end of the legislative session without the required three readings. The lack of transparency was glaring.
The small businesses and nonprofits targeted for this tax had little time to become aware of what was happening to them. As a result, their voices went largely unheard. A partial list of those targeted included auto repair shops, lawn services, pet groomers, landscapers, janitorial services, small animal veterinarians, diet centers, as well as dry cleaners.
Nonprofits feel blindsided by the new tax on their events. “Nobody expected this to happen. Nobody put it in their budget,” said Scott Watkins, Orchestra Kentucky executive director, who we are certain expressed the concerns of nonprofits here as well as across the state.
In the interest of full disclosure, the sales tax on events will impact the recently announced Vette City Motorcycle and Music Fest being brought to Bowling Green in October by this newspaper and D93 WDNS-FM.
The Daily News, unlike the nonprofits, however, already pays sales tax on certain transactions. Nonprofits will have to deal with the increased cost of compliance as they scramble quickly to get up to speed administratively to comply.
If you look at the aforementioned list of small businesses targeted by the sales tax, it is apparent that they do not have the same legislative clout and influence as bigger, better financed entities with well-paid lobbyists.
The conclusion we draw from this is that a cynical political calculation was made to target these small businesses precisely because of the lack of political clout. This approach is totally wrong. Pensions and taxes are joined at the hip with public service employees, including teachers.
Because these pensions are an obligation of society, any taxes levied to shore up the system need to be as broad based as possible.
Senate Bill 151, the companion bill to HB487, was recently ruled illegal by Franklin Circuit Judge Phillip Shepherd. The fate of this legislation will likely be determined by the Kentucky Supreme Court.
If Shepherd’s ruling is upheld, pension reform is dead until the legislature decides to tackle it again. But the tax increase whose purpose was to raise revenue to support pension systems will remain.
Letting these taxes stand without the pension reform used to justify them is unconscionable.
The legislature should repeal these taxes at their earliest opportunity. At such time as they tackle pension reform in the future, any taxes enacted should be broader based to reflect our society’s responsibility to education and other public services all citizens benefit from.